Datatec has suspended the Westcon Group`s initial public offering (IPO), citing weak stock markets in the US and the need to improve Westcon`s performance.
"The Nasdaq has fallen about 10% since we announced the Westcon IPO in January, and valuation ratios of Westcon`s major listed competitors have compressed sharply since then," says Datatec CEO Jens Montanana.
He points out that Cisco`s share has lost about a third since January and competitors that have reported a modest improvement in profit have seen their values fall.
"Stock market conditions are therefore not conducive to achieving appropriate value from an IPO.
"In addition, given Westcon`s performance for the half-year and the substantial ongoing costs of maintaining a filing with the SEC (Securities and Exchange Commission), management believes it is not in the interests of Datatec shareholders to incur such costs until Westcon`s performance and market conditions have improved."
He says the SEC has to be updated with new financial information every quarter, and the group would have to spend $0.25 million to $0.5 million every 90 days on SEC filings as a result.
The plan to list Westcon on the Nasdaq was revived in January after the group put a hold on the process in 2001, saying it would wait for stronger technology markets before proceeding with the IPO.
According to documents filed earlier this year, the listing could have raised up to $115 million.
"We are disappointed," says Montanana. "Of course we are disappointed." He says the group will not look at the IPO again until the new financial year.
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