Tungsten/OB10: Next Procurement Technology IPO Now “Oversubscribed”

The Telegraph recently reported that Tungsten/OB10 are “set to make £160m with 'oversubscribed’ flotation on AIM.” Translation into American English investor-speak: Tungsten/OB10’s initial public offering (IPO) appears ready to hit the streets, and there are more institutional buyers of the stock than the issuance made available – despite the fact the stock will trade on an alternative exchange compared to most large tech offerings.

The oversubscribed aspect of the deal potentially means three things.

First, the company may have an option (or at least it would on the NASDAQ or on another US Exchange) to issue an overallotment of shares, effectively increasing the offering. UK rules may be different, however, and this may not be in the cards.

Second, the Tungsten/OB10 would typically price at the higher end of the offering range given the interest (again, the US rules may work differently here with offering ranges being put on the draft S/1 documents without finalization until the actual offering itself in the US). For example, at FreeMarkets in 1999, the firm expected to raise around $16-$18 per share, but the number was actually $48 due to high demand.

And third, based on the oversubscribed nature of the IPO, it is likely that demand will be strong once the shares begin trading, suggesting a likely rise in price from the offering range based on historical precedent. This would be good for the industry for a number of reasons. Perhaps most directly related, such a “pop” as it is known is likely to drive further investor interest in the broader procurement, A/P, and supply chain technology sectors, potentially giving a longer-term lift to existing already public providers in the area, such as SciQuest, Basware, and Esker, and fueling the IPO filings of potential new offerings in 2014 (e.g., Fieldglass, IQNavigator, etc.)

Moreover, these potential future public companies may be valued even higher than the initial level of Tungsten. This is because it’s difficult to establish benchmark valuations for the OB10 business given the fact that the revenue model is a mix of network software and services (i.e., the services component being tied to supplier on-boarding and enablement – especially the “recruitment” process for bringing in new suppliers after their customers have signed up to the OB10 network) and the financing component is still and unknown.

Regardless, regarding the transaction at hand, here are some further notes from The Telegraph:

Mr. Truell [whose investment firm put together the transaction] opted to acquire electronic invoicing company OB10, which processed £100bn worth of transactions last year alone and boasts GSK, Unilever and Centrica among its clients … [the firm is making] a flotation on AIM to raise £160m. Out of this sum, the directors are paying OB10’s 140 existing shareholders £70m and giving them “a second bite at the cherry” with a 13pc stake in Tungsten, said Mr. Truell. New investors on the stock market will have 70pc for £160m, while he and his colleagues will own 17pc … the books [closed last] Wednesday … and [the issuance is] comfortably oversubscribed.”

The article notes that Tungsten/OB10 are still waiting for their bank license based on “regulatory approval for the purchase of a bank, which will enable [the firm] to turn OB10 into an invoice financing business, with considerably higher margins.”

For further information on the Tungsten/OB10 combination, including the bank and financing components, see related Spend Matters and Spend Matters Plus/PRO subscription coverage:

JPMorgan Chase to Shut Down Xign (free access)

Visa Exits Syncada Relationship (free access)

Tungsten Agrees to OB10 Buyout, Also Combines a Bank and Analytics Capability Into IPO Candidate (free access)

Expert Interview: OB10, Tungsten and Supply Chain Finance

Tungsten and OB10: Supplier Networks – Connectivity Today, Analytics Tomorrow

Supplier Networks and E-Invoicing: Selection Strategies Emerging In 2013

10 Reasons For Procurement to Work With Payments (Part 1)

10 Reasons For Procurement to Work With Payments (Part 2)

10 Reasons For Procurement to Work With Payments (Part 3)

An Opportune Time for Collaboration: Procurement and Accounts Payable

CPOs Owning Accounts Payable – Does Supply Chain Finance Make it Interesting at Last?

Are Supplier Networks Addressing Supplier Risk, Performance and Compliance?

Intuit and QuickBooks in 2020: 10 Potential Network-Based Services Offerings (Part 1)

Intuit and QuickBooks in 2020: 10 Potential Network-Based Services Offerings (Part 2)

Disclosure: Tungsten/OB10 is a Spend Matters Group, LLC client.

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