The IPO is back

All of a sudden, the IPO is back as a legitimate growth option for Australia’s best SMEs.

Yesterday’s announcement that the Brisbane entrepreneur Jamie Pherous is looking to float his travel business Corporate Travel Management and raise $21.7 million, and that PIPE Networks founder Bevan Slattery is looking to float his data centre group NextDC in a $60 million float, are signals that market appetite for SME floats is improving.

For the last two years – longer, perhaps – the IPO market has effectively been shut for medium-sized companies. Jittery investors would take fright at the smallest bit of bad news, so there was little appetite for medium-sized growth companies, with all their attendant risks.

But Pherous, who started CTM in 1994 and has steadily grown it through a mix of well-timed acquisitions and organic growth, clearly believes the window is open, and he’s bounding through.

Crucially, Pherous is not selling any shares, which will reinforce to potential investors that this is a continuing growth story and not an exit story.

However, the performance of this float – both the ease with which Pherous can bring new investors on board, and the performance of the company’s shares when it finally hits the ASX – will be a bellwether for SMEs who might be considering the IPO as a growth strategy.

Quite simply, if the float does well, it will be a sign that investor appetite for SME growth stories is starting to return.

Slattery’s potential float is perhaps less of a bellwether. His reputation with investors is impressive, and his name alone would bring a great deal of support.

Still, the successful float of NextDC would help shine a light on SME growth companies for ASX investors.

It’s interesting to note too that the underwriter of the CTM float and the rumoured underwriter of the NextDC float is RBS Morgans.

That’s a great sign that the top end of town is once again looking closely at where the next growth opportunities are coming from.