To me a successful IPO:
is fully subscribed
raises the money at a fair price
results in a healthy listing
Xero was fuly subscribed, BF was not. We shall wait and see whether BF is able to make the second deadline with a meaningful shareholder base.
To determine whether the price was fair, we look at what happens post IPO. If the price skyrockets then the shares were underpriced and more value could have been extracted. If the price drops (or if the issue is undersubscribed) then the reverse is true. XRO is now a bit under $1, and the knives are out, though the drop is not that large for such a thinly traded stock. BF was overpriced as it was not fully subscribed.
A healthy listing means that the shares are actively traded. Active trading means the price remains correct and not volatile, and means that it is worth it for the exchange to have the stock listed. XRO is on the main board of NZX, but as my friend points out in the comments to the previous entry, it is not actively traded. I don’t believe this is showing success, and certainly would not be seen as such on the Nasdaq and the like. I do not know whether that is a symptom of NZ’s tiny market and small number of participants, XRO’s tightly held shares by a few big shareholders or general apathy.
Suffice to say that a market is meant to price shares correctly, and if that is not happening, then we do not have a market.
Lance Wiggs 
I think what it means is that Xero investors, big and small, were making a long term play and don’t want to sell. In fact I doubt many of them follow the shareprice at all.
As such the current Xero shareprice is meaningless – the shareprice in 36 months however will be very very interesting
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then why are those original investors not snapping up more shares? If they believe XRO is worth $1 then that’s what the price should be.
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I suspect that one or two original investors are, but I also suspect that despite the current sell price of 92c there are very few parties willing to sell for much less than they got in at. So until someone is prepared to purchase at between 105 and 110, which is where is suspect the large parcels of sell orders are at, then it will sit where it is for a while. I wanted to be more definitive about this but couldn’t log onto to my online broker to see the actual buy and sell details.
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Those who are waiting to sell at $1.10 should be buying right now so that they can clear a healthy profit.
That is if they believe the price will rise.
The range of prices for XRO so far is $0.87 to $1.17 – with that sort of volatility you’d expect people to pile in.
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Ben
While I think XRO has a sound business model and value proposition, and may do well in the future, at the end of the day I believe the IPO investors were sold up the river.
Lets looks at the basic fact.
1 share in XRO which was worth $1, and at one stage was valued at around $1.12 (from memory), “Mr Market” is now saying its only worth 87 cents (26/07/07 close).
“Mr Market” may not always be the most rational investor, but he knows the value of 1 share. “Mr Market” is the one who has shown the money and traded. He doesn’t explain away liquidity. He has instead put his money on the table and said 1 share in XRO is currently worth 87 cents.
The implications for those in the IPO? Clearly they are showing a paper loss. They may at some stage in the future decide to realise the loss, or realise the profit. I think that each day the share price remains below the $1 mark, the further dents the credibility of the promoters who have clearly overpriced the IPO. This will make it harder for them to seek further capital raisings in the future as investors may be a bit more sceptical of the hype.
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I agree with Ben. Short term movements of about 10-15% would be fairly meaningless to the investors who did take the plunge here. 10-15% on a sharemarket is not unusual for an IPO, and people can quote all the supply-demand / free market / market economy theory they want, but I wouldn’t pay too much attention to it at this stage of the Xero game. There is too much uncertainty. Numbers are important, but more important in an IPO like this is the people, the idea, and the scale at which it could take off.
I don’t think people would look to make a quick buck out of something like this. Smart investors don’t put all their eggs in one basket. And they only have a limited amount of eggs – which is why they’re not snapping up more shares. The New Zealand market just isn’t big enough.
If I had money (which I don’t after returning from an 18 month OE), I would invest in Xero. I would look at the numbers, but would get excited about the people and the idea. Xero has both the people and the idea. It also has a head start on the competition. It also has incredible scale. Both globally and product wise. Financial markets are huge, and if Xero can get established it has huge potential for becoming a one stop shop for business finance needs – foreign exchange, loans, all banking.
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