Friday, September 14, 2007

SAP teeing up a rollercoaster IPO ride

Talk about putting it all on the line. You've probably seen the adverts around - SAP has taken a bit of a flying leap by sponsoring the Go4Growth competition, with the prize up for grabs - a listing on the JSE!

They say they're looking for "SA's most committed to growth company". Sounds awesome, but it will be interesting to see how they judge that one.

In the end, its marketing. And taking such a different approach, doing what hasn't been done before, I can only applaud their effort [and their ever-increasing focus on SME's].

On the one hand, they might be letting themselves in for far more than they anticipate - each company that they select will undergo a due diligence. Even a limited due diligence [done properly] would consume a couple of professional staff for at least a week. And then, there is always risk in a DD, so they have to get it right to take the company further in the competition. I can't imagine that getting through all the entrants [according to ManufacturingHub there are more than 100] will be a cheap exercise for the competition sponsors.

On the other hand - how exciting! What if it does work? What if they unearth a diamond in the rough? What if this is the start of an unbelievable ride for an unassuming company that will change its future immeasurably?

What I do find a bit strange is the bigger picture. Surely any company which is geared and ready for listing should already be investigating or in the process [and would certainly not want to risk wasting time on trying to find out whether they win a competition or not - the pending inflow of funds should already be earmarked for some type of investment]. This leaves those available to enter as being companies which are probably sitting on the fence - "Maybe we want to list, maybe we don't". There is a possibility this could pan out well and exceed everyone's expectations, but looking at the facts, it seems a bit high risk to me - for both the sponsors and the winner.

Only time will tell. Best of luck to SAP and the contestants [not to mention the JSE, AltX and Exhange Sponsors, who may well have their patience tested a little more than usual]. Personally, I hope that it does work... it could just breathe a bit of new life into aspiring unlisted companies.

As an aside, its interesting that the competition is open only to private companies [(Pty) Ltd's] and cc's. Since those entities would have to be converted to public companies anyway, I can't understand why they don't allow public [Ltd] companies to enter. Surely this wasn't the intention in laying down the ground rules.

Oh, and perhaps, with all the hype about reality TV shows, they'll also be filming the process, and we'll capture the highly stressful listing process on camera? Personally, I'd prefer that to some of the other rot they're putting on the box nowadays. We could even get guest appearances and insight from some of SA's top business moguls. What do you think?

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