Poor outlook stalls IPOs

Two telecommunications and internet-based companies have decided to delay until further notice their proposed initial public offerings in Australia because of poor market conditions.

Vodafone Pacific and ComVergent Telecommunications both announced in the past two days that they will postpone their prospective floats.

Telecommunications analyst Paul Budde termed the delay a wise move. "Vodafone is a solid company," he noted. "It's not one of these dot-com companies. They've built up a network and assets.

"For them to gamble on what the share price might do wouldn't make sense. They can afford to wait three or six months or even a year, after the market has settled down, as it will. In the business picture, nothing has changed, especially in telecommunications.

"It's one thing if you have a company not built on assets but on hot air; then it doesn't matter if the share price is two dollars or a dollar or whatever, because you're only selling hot air. In this situation there's far more at stake."

The Australian newspaper has quoted sources yesterday as confirming that the 17 per cent Vodafone IPO was recently valued at around $A1.36 billion, less than half the amount estimated just a few months ago.

Announcing ComVergent's decision, managing director Adrian Coote said: "We do not feel the true value of ComVergent would be realised under current market conditions." A company spokesperson added that ComVergent's business plans in Australia were not contingent on the float proceeding at this time.

Budde said that similar considerations applied to ComVergent. It might cost these firms some money in the short term, he noted, and there might be a bit of initial public relations backlash, but apart from that, the delays made sense.

"It's no longer a market where you've got a reasonably small number of financial analysts setting the scene," he said. "It's a market in which about half the population of the western world participates.

"It's like a huge casino, and to put your stakes on the table where at least 90 per cent of the players don't know anything about you (and in fact aren't really interested) is dangerous."

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