The splurge of listings by tech companies on the NZX is a terrific sign of health and the critics of tech stocks can go to hell. In the last month it’s become de rigeur for commentators to get all sniffy about the rise and fall of growth stocks such as Xero, IkeGPS, Serko and Pacific Edge.
They say things like ‘investor appetite is continuing to wane’ and ‘investor scepticism is heighted by their poor performance.’ Investors are becoming ‘impatient’ and tech companies now have ‘heroic expectations’. They even say we are at risk of the ‘irrational exuberance’ that preceded the dot-com crash of 2001. It’s true that it’s been a roller-coaster for investors. What did they expect? Growth stocks by definition are high risk.
The same Xero that fell to a ‘disappointing’ $23.50 only a few months ago rose to a ‘spectacular’ $44.79. If anything is disappointing it’s the New Zealand investment community. Small, conservative and greedy for dividends, our traditional investors are ill-equipped to handle the vicissitudes of young tech companies.
The critics are wrong. For one thing, we’ve hardly reached fever pitch. As analyst Brian Gaynor points out, even if there are 30 listings this year (many of which are tech stocks) “this is well short of 1985, 1986 and 1987 when there were 32, 50 and 65 IPOs respectively.
These mid-1980s IPOs were particularly low quality, with Michael Hill International the only one of the 147 new listings to have survived on the NZX in its original form”.
What’s more, they’re adding much-needed diversity to our investment scene. Like many others, I’ve despaired at the increasing 'dairyfication' of our economy.
No criticism of dairy of course – thank goodness for Chinese mums. But for 15 years I’ve seen cool tech companies get built and flicked to overseas buyers before Kiwis can really get a share of the action.
At last they can. And it’s only getting better. Here at Idealog HQ we see a pipeline full of new companies. And the new growth exchange which is to replace the NZAX will add transparency and deeper analysis, which should build confidence in our investment scene. The New Zealand Herald recently asked if the party was over for tech stocks. I say it’s barely begun.