Investors who subscribed to the highly anticipated float of MYOB Limited (ASX: MYO) will learn the final price for their shares on Friday following a two-day book-build run by the accounting software provider's lead managers.
The lead managers behind the initial public offering (IPO), being Citigroup, Goldman Sachs, UBS and Bank of America Merrill Lynch, will meet on Wednesday and Thursday to determine where in the indicative $3 to $4 price range the shares will sell for.
It is a similar approach to that taken by Medibank Private Ltd (ASX: MPL) in November last year where its shares actually sold outside of the indicative price range due to excessive demand.
The shares will commence trading on Monday, 4 May.
Is MYOB worth the hype?
While Medibank's shares were always expected to sell at the upper end of the indicative price range, there has been plenty of debate as to what price MYOB's shares will be sold at initially.
The Fairfax press reported a strong response from investors to the company's three-week roadshow, which could suggest the stock will sell at the upper end of the provided range. This is supported by the fact that Bain Capital's (the company that currently owns MYOB) most recent IPOs have generated fantastic returns for investors, whereby investors will be hoping for a similar performance from the accounting software group.
At the same time however, other analysts are suggesting that the stock could be overvalued at the higher end. At $4, the company would have a market value of roughly $2.26 billion and would trade on a multiple of 24.9x forecast net profit (with amortisation added back in) for the 2016 financial year.
Indeed, that is considerably more expensive than the average price-earnings ratio for the companies that make up the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), and could be too optimistic considering MYOB's rapidly growing rival, XERO FPO NZ (ASX: XRO), which is gobbling up market share in New Zealand, Australia, the US and UK.
Here's what I'm doing instead
While some investors will no doubt be eager to get their hands on their fair share of MYOB's stock, I'm going to sit on my hands with the Xero shares I purchased last year. Although Xero is yet to make a profit, it is showing all the signs of a company that will be much larger in the coming years.
I acknowledge that I may miss out on some quick gains on MYOB's shares if investors do pounce on it early but right now there are a number of other companies I am eager to capitalise on that I believe are presenting as far greater long-term value.
