Tech IPO Softcat sizzles on debut

A month after confirming plans to IPO in London, software reseller Softcat has got its float away in spectacular fashion. Within an hour of the opening bell, the shares had risen 20%, pricing the 22-year-old company at £568 million. And that very much follows the trend for this year's handful of tech IPOs during the past five weeks (see chart below).

Pricing its IPO at 240p a share, or £472 million, Softcat has delivered a windfall for senior staff. They'll pocket at least £153 million, but it could be as much as £176 million if the entire over-allotment option is exercised. Founder Peter Kelly is understood to have offloaded a third of his 52% stake, netting a cool £88 million.

Softcat's shares initially rallied close to 290p Friday, although the price had settled to 275p by mid-morning. Clearly the City is excited: "The successful pricing of our initial public offering on the London Stock Exchange reflects the very positive response we have received from institutional investors as we have shared our equity story in recent weeks," said chief executive Martin Hellawell.

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This follows security company Sophos and payment processor group Worldpay's flotations earlier this year, which have since grown by 13% and 5% on the market respectively. Share registrar Equiniti has also recently been flirting with an IPO.

Launched by Peter Kelly in 1993, Softcat sells IT solutions to improve the technology, infrastructure and security of small and medium-sized businesses, as well as larger firms and the public sector. The firm, which became the largest supplier of Microsoft software licencing within just four years, also works with Apple, Cisco, Dell and HP. It's also recently been voted second best place to work in the UK.

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And Softcat certainly joins the market in good health. Its customer base has tripled since 2007, sales surged by 50% to £596 million in the three years to 31 July and adjusted operating profit jumped 44% to £40.6 million over the same period. A head-turning average cash conversion rate of 109.2% underpins a pledge to pay annual dividends worth 40-50% of post-tax profit.

Softcat has a stellar management team behind it, too. Hellawell, who also bagged a fortune from the listing, is no stranger to IPOs after floating Computacenter in 1998; chairman Brian Wallace has had stints at Ladbrokes and Hilton Group; and number cruncher Graham Charlton has experience at comparethemarket.com. Vin Murria, currently a non-executive director at Zoopla and Greenko also joins the board.