Luxoft: Interesting IPO Though Concerns Exist
With the IPO weakness at the end of June, Luxoft Holding (LXFT) provides an interesting Eastern European investment idea
Jul 31, 2013
One of the major reasons that Luxoft grabbed attention was the success of EPAM Systems (EPAM). That company had an IPO back at the start of 2012 and has seen the stock more than double during that time period.
Luxoft is a leading software development firm with operations based primarily in Russia, Ukraine and Romania. It also has minor operations in locations such as Poland, Vietnam, UK and the US. The company is a global software development services and IT solutions carve out from IBS Group that sold over 2.6 million shares counting the over-allotment amount.
The company competes in the crowded IT offshore outsourcing sector against the likes of EPAM, Infosys (INFY) from India and Cognizant Technology Solutions (CTSH).
IPO Details
During a historically weak IPO week, Luxoft priced at the midpoint of the originally expected range of $16 to $18. It was only four out of ten IPO offerings for the last week of June that actually held the midpoint of the original range.
Luxoft offered 4.1 million shares with selling shareholders counting for 50% of the shares. The company will only receive gross proceeds of roughly $32 million. With six of the ten stocks pricing below the midpoint during the last week of June, Luxoft had a successful IPO to price at the midpoint.
The company only raised roughly $32 million from the offering and had limited cash prior, so it only has $35 million in cash following the IPO. This amount is considerably small for a tech company that usually has over $100 million in cash following a successful IPO. The concerning part is that it has roughly $15 million in required dividend payments that will eat up operating cash flow for the next several months.
The stock has performed well in the market after opening at $18.55 and closing at $20.38 on the first day of trading. The stock now trades around $22 following a couple of good weeks of trading.
Luxoft is a leading software development firm with operations based primarily in Russia, Ukraine and Romania. It also has minor operations in locations such as Poland, Vietnam, UK and the US. The company is a global software development services and IT solutions carve out from IBS Group that sold over 2.6 million shares counting the over-allotment amount.
The company competes in the crowded IT offshore outsourcing sector against the likes of EPAM, Infosys (INFY) from India and Cognizant Technology Solutions (CTSH).
IPO Details
During a historically weak IPO week, Luxoft priced at the midpoint of the originally expected range of $16 to $18. It was only four out of ten IPO offerings for the last week of June that actually held the midpoint of the original range.
Luxoft offered 4.1 million shares with selling shareholders counting for 50% of the shares. The company will only receive gross proceeds of roughly $32 million. With six of the ten stocks pricing below the midpoint during the last week of June, Luxoft had a successful IPO to price at the midpoint.
The company only raised roughly $32 million from the offering and had limited cash prior, so it only has $35 million in cash following the IPO. This amount is considerably small for a tech company that usually has over $100 million in cash following a successful IPO. The concerning part is that it has roughly $15 million in required dividend payments that will eat up operating cash flow for the next several months.
The stock has performed well in the market after opening at $18.55 and closing at $20.38 on the first day of trading. The stock now trades around $22 following a couple of good weeks of trading.