Nasdaq's Holy Grail loses its shine

With the Nasdaq lustre becoming increasingly tarnished after the savaging that Iona, Icon, Saville and CBT have suffered in recent months - even Elan to a lesser degree - is the much-maligned Irish stock market going to stage a return as a fundraising area for cash-hungry Irish technology shares?

The carnage on Nasdaq in recent weeks - only Esat and Ryanair have been immune - must have had the management of some of our high-tech companies quaking in their boots, and some in the Irish corporate finance business believe that fewer and fewer companies will be willing to subject themselves to the rigorous treatment that goes hand-in-hand with a Nasdaq listing and the associated inflated earnings multiples.

It's all very well to float a business on p/e's of 30-plus, but when a comparatively modest warning can knock 60 per cent off a share price (in Icon's case), then it is surely time for some sober reflection on the part of our high-tech entrepreneurs.

Put it this way, the sort of profits warning sounded by Icon would probably have knocked about 10 per cent off the share price if it was listed in Dublin or London compared to the 60 per cent knock that the shares took on Nasdaq.

So, it was noteworthy that Samir Naji - that Corkman of Egyptian stock with the Silicon Valley accent - has revived the flotation of his Horizon computer group, a flotation that was put on ice last year after the markets had their August-September wobblies.

Instead of going public, Horizon raised £5 million in a private placing - showing that there is institutional interest in small companies as long that as they are in growth sectors. Now comes the public listing in Dublin and London with presumably another wodge of equity being issued to provide liquidity in the shares and to dilute Samir Naji's 67 per cent stake in Horizon down to a more logical level.

Another high-techie that shelved a flotation last year because of the state of the markets was Flexicom, which instead raised £3.5 million in a private placing from five institutional investors include AIBIM, Standard Life and Mercury. That placing valued Flexicom at just £19 million (€24 million), again showing that high growth prospects are enough to get around the current fund manager antipathy towards small capitalisation stocks.

Now Cyril McGuire of Trintech, which raised $20 million (€18.57 million) in a private placing last year - supposedly as a prelude to a Nasdaq flotation - seems to have gone decidedly cool on the prospect of a New York listing and cited the recent experiences of other Irish high-tech companies on Nasdaq as the reason.

The Dublin and London markets may be more reluctant to invest in companies on Nasdaq-style multiples, but they are usually more forgiving of one-off falls in earnings, and do not include in their ranks the short-term momentum investors who are one of the root causes of the volatility of Nasdaq stocks. A move away from Nasdaq may also be a boost to Easdaq, its Brussels-based equivalent which has yet to establish itself as a serious competitor.

A year ago, a Nasdaq listing was the Holy Grail for Irish high-companies. How times change.