Last year three IPOs happened in a short space of time in New Zealand. They were all small(ish) businesses but from varied sectors. In short space Xero, Burger Fuel and Diligent Board Services listed. Despite the pre listing analysis of all three businesses, I relied on a simpler method – gut feel.

Xero was a business that had a logical story – take accounting for SMEs, traditionally delivered via a desktop application, and deliver it via SaaS. Xero, from day one, struck me as a well thought out concept. The founders were serial entrepreneurs who had no real reason to do another start-up other than passion. It was also obvious that their intentions were to build a sustainable business and quick build and flick wasn’t the goal.

Xero has broadly delivered what it promised, hasn’t delivered any surprises (either positive or negative) and feels (from the outside at least) like a “slow and steady” sort of an operation. While I had concerns as to whether Xero would get the sort of uptake they promised, there was never any real doubt that the business would scale to a reasonable size.

My advice, then and now, was that Xero was a risky investment, but a calculated one. Suitable for a long term purchase and hold as part of a diversified portfolio.

Burger Fuel listed almost concurrently with Xero. Their listing was interesting – rather than relying on the more austere (and proven) processes, they decided to create a listing document that targeted their customers – young, hip, and generally non-investors. They plastered the offering doc all around the restaurants and not surprisingly the IPO was undersubscribed.

My advice from the start was that Burger Fuel was just another, less than highly differentiated fast food chain. As such, scaling it both domestically and internationally, in the face of massive competition and falling revenues for the traditional burger establishments was a hard ask. Then and now I advised steering clear.

And now we come to Diligent Board Services. This was a slightly different kettle of fish. Diligent has been going since 2001, it’s offering (managed board meeting papers available via SaaS) is kind of bizarre (I have met plenty of corporate board members, almost too a person they are technophobes who have their PAs check their email – the idea of these people using a web based product was just too strange) but they had some high profile customers and some New York credibility.

There offering however rung warning bells for me – it just seemed to slick and slick like a Nigerian email scam, not like a Milan suit. During the IPO things unravelled somewhat when it was discovered there was an undisclosed connection between some of the founders and some shady corporate failures from the ’80s.

So… how did they all do. Below are the NZX charts for the three stocks – bear in mind they all listed at $1. Xero is top, followed by Burger Fuel and then Diligent.




Yes indeed, BF and Diligent can only be described as utter failures, trading at less than half of their listing value. Xero hasn’t been a superstar but it’s hovering around listing value and seems solid.

The purpose of this post wasn’t to suggest that people follow my investment tips – rather it shows that sometimes a bit of personal research, a dose of logic and a touch of gut instinct can be a good way to do things. Now what would my advice have been about Google if I was blogging when they listed???

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

  • My gut tells me not to invest in paper assets until you have your tangible assets secure (ie: house). Even then, I’m more of a commodities man myself. (ie: gold, silver, oil…)

  • Hi Ben,

    It’s all very well highlighting Diligent’s NZX failure, but you hyped them up when their IPO was announced. You’ve suggested in this post that you had concerns with their IPO, yet at the time you said “It’s a very good thing – a stable mate for Xero”. If you had genuine concerns then why not highlight them at the time?

  • @craig – thanks for the comment. My concerns were raised when it came out about the less than kosher connections and business histories of some of the players. At face value (and when I wrote the initial post) diligent looked good from a business perspective. True I should have queried the very business model and I take your criticisms as justified – cheers!

  • No problems Ben and thanks for the reply. I just found it strange at the time that you likened Diligent to Xero when I felt they had completely different business models and target market. I see Xero as “consumer” or “retail” SaaS product where I would class Dilgent as a commerical or enterpirse SaaS offering.

  • Interesting views, I didn’t understand DIL when it listed so I didn’t touch it, but I bought into both XRO & BFW.

    My father was an accountant and understood their product, but believed it would still be a hard market as others do offer other similar online products, although XRO is way ahead, those others already have a large customer base.

    BFW choose an very unusual way to list which caused it to be undersubscribed, and cost it a lot in the process, but I eat there every so often and believe that they too have a competitive advantage in a very competitive market. Roberts used to run Redbull and turned that from a $10m revenue business to over $200m if my memory serves me well.

    Now since listing XRO went to 1.15 down to 70 and is now at 93(13 months at 9 months it was 75). BFW went from 1.00 to 0.37, and now at 0.50 (9 months).

    To date I wouldn’t have considered XRO or BFW a success they have both traded below issue price and are burning all the cash they received from their IPOs, as you would expect, they are both growth companies.

    The thing is, most investors who bought XRO were recommeneded it by the brokers, and advising community, when it dropped their advisors would not have sold off, as they are experienced and would have provided (hopefully) good advise, and said it was a growth stock.

    BFW on the other hand has shareholders who don’t use advisors, don’t normally invest and don’t have the experience to make good decisions when they risky growth stock they chose halves in (perceived) value because of illiquidity.

    XRO has announced massive increases in customers, BFW has announced ambitious plans for a launch into Dubai. Both of these are positive for both companies.

    My thinking is I still eat at BFW, and I still see others doing it to. If they succeed there will be good revenue upside, and when these positive announcements happen who is going to buy the share? Everyone, because currently just like you, nobody owns the share, as no one was advised to buy it.

    I don’t think you can write off or promote either as an utter failure or success when both are currently trading at a paper loss.

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