Opportunity To Invest In A US-Based Growth Company
Diligent IPO Offers Unique Opportunity To Invest In A US-Based International Growth Company
Diligent Board Member Services, Inc (Diligent) has launched its initial public offering, providing New Zealand investors with an opportunity to participate in the international growth of the Diligent Boardbooks corporate governance software.
Diligent Boardbooks allows the directors of corporates and other organisations to review, update and comment on board materials via the Internet. This removes the need to manage voluminous, unwieldy and often out-of-date paper files. In technical terms, Diligent Boardbooks is a Software as a Service (SaaS – Web 2.0) application, hosted and maintained entirely by Diligent and thus eliminating any need for in-house maintenance or expertise on the part of client organisations.
“In the near future,” says chief executive officer Brian Henry, “every significant board in the world will be using online digital boardbooks.”
Key offer details
The prospectus for the Diligent IPO was registered on 8 November, and the offer is open from today until Wednesday 5 December. The offer, being made to the public and institutional investors in New Zealand, invites subscriptions for 24 million shares in Diligent at NZ$1 per share. The minimum application is for 3,000 shares.
On completion of the IPO, the company will have a market capitalisation of approximately $104 million.
Given acceptance of its application for listing on NZX, Diligent will be the only United States based company listed only on the New Zealand market. It is anticipated that trading in Diligent shares could begin on Tuesday 11 December.
The prospectus can be obtained from the Lead Manager, McDouall Stuart Securities, at 0800 – 577 777 or firstname.lastname@example.org
A key feature of the offer is a performance warranty being offered by the company’s founding shareholders. These shareholders, through DBMS LLC, are warranting that they will forfeit up to 20 percent of their shareholding if licence fee projections contained in the company’s prospectus are not met.
After the IPO is complete the Diligent founders will retain a combined shareholding of 67 percent, converting debt holders 6 percent; employees and directors 4 percent and new shareholders, including Huljich Wealth Management, 23 percent.
Huljich Wealth Management has purchased 3.28 million shares in the company prior to the IPO, on terms consistent with those being offered in the IPO. Huljich Wealth Management managing director Peter Huljich has joined the Diligent board of directors.
“We became aware of Diligent’s plans to float earlier this year and were immediately impressed by the company’s product offering, business plan and management,” Mr Huljich said. “We recognised that this provided a superb opportunity for our investment fund to make its first major purchase since being opened to the public in August this year. We are confident it will perform well for our investors and others.”
Diligent has its administration and sales headquarters in New York. Christchurch is the hub for its software development and IT support operation, which was relocated from New York following the September 11 attacks. Mr Henry, a New Zealander who has worked in the United States for approximately 20 years, maintains a residence in Christchurch.
The Diligent Boardbooks software has been available to clients since 2003 and is being used by many blue chip corporations, including AIG SunAmerica, Investors Bankers Trust and Motorola. Whilst the product has not yet been marketed in New Zealand, it is being used by NZX and lines company Vector, and the company is fielding enquiries from other organisations.
The proceeds from the IPO will fund the international expansion of Diligent’s sales force to drive increasing market awareness and revenue. The company’s growth to date has been based on a sales force of just one-to-two full time equivalents, and its business plan sees that expanding to 78 over the next two years.
Diligent’s global target market includes more than 30,000-plus banks and 60,000-plus mutual funds. The market penetration of digital Boardbooks is currently very low. It is estimated that, within the United States, less than 20 percent of companies currently use a web-based board portal – and less than five percent of those use an externally provided portal.
Mr Henry says ease of use and extremely strong security are the key features of the Diligent Boardbooks software. “The product was developed over three years following a request from AIG SunAmerica Funds, which was a client of Diligent’s predecessor company, a New York based software development business. The commercial rollout commenced in 2003, and we are now at the point where client feedback and other commentary suggests that Diligent Boardbooks is the leader in this field. Nevertheless, we have only scratched the surface of the opportunity.”
Diligent’s business model delivers a one-off installation fee (typically about US$6,000) that meets the costs of setup and client training, along with a recurring income base in the form of annual licence fees. The average annual licence fee is approximately US$31,000. The prospectus for the IPO projects total revenue of US$5.8 million (US$11.8 million recurring) in the year to 31 December 2008, and US$22.9 million (US$28.8 million recurring) in the 2009 year as the company begins to experience the benefit from the increase in its sales force.
Board of directors
Diligent has an international board of directors reflecting the company’s history, target markets and New Zealand listing. Two directors, including Chairman Edward Charlton – a Director of HSBC Private Bank in London – are based in the United Kingdom. Three, including Mr Henry, are based in the United States. Three – Peter Huljich, professional director Rick Bettle and Christchurch lawyer Mark Russell – are based in New Zealand.
New Zealand listing
Mr Henry said Diligent was delighted with the response to initial reports of its intention to seek listing on the New Zealand market. “I would like to publicly acknowledge the support provided by NZX for the listing process, and also to thank the institutions and other investors who have expressed their strong interest in the company.
“New Zealand is the ideal market for Diligent to be listed in. Aside from personal ties, the expertise of our Christchurch team is perhaps the critical element in the company’s ability to deliver its product offering.
“We have looked at other options for raising the capital required for our sales rollout, including offers to list in the US and UK, and offers to purchase the company from private equity players and financial services groups. None of these could match the benefits of listing in New Zealand.
“Listing is of considerable advantage to us, as it replicates the governance status and requirements of the great majority of our clients… and the size of the New Zealand market is well-suited to Diligent – it provides us with profile and visibility that would not be readily achieved in private ownership or through listing in other markets.
“We are very much looking forward to sharing the growth and success of the company with a wide New Zealand investor base.”