Macquarie set to redeem itself with $1.5 billion Nuix float

Some investors may have been shocked by Macquarie Group’s (ASX: MQG) 35% net profit slump but there is every chance that the investment bank could come back bigger and stronger.

One of the ways it could do just that is through the much awaited $1.5 billion float of its data analytics startup Nuix.

The stars are aligning for the Nuix float – and many other floats, for that matter – which is set to be the biggest in Australia this year as the IPO market continues to enjoy a moment in the sun.

Riding a boom in share market traders and investors

While the COVID-19 pandemic might have left a big dent in Macquarie’s half year results, the rush of people at home without much to do also produced a boom in share market interest, with an estimated 300,000 new Australian online broking accounts set up.

Combined with rapidly falling interest rates for bank deposits and less investor interest in the shares of the big banks as their dividends fell, the rush of new investors and traders in the market is leading to fresh opportunities for small companies looking to list.

Buffett made $1 billion backing a float – first time in 64 years

It is also an international trend with the world’s greatest investor, Warren Buffett, investing in his first IPO since 1956 which saw him make an astonishing $1 billion paper profit on the first day of trade.

Buffett’s gain on his stake in US tech firm Snowflake, which saw its shares double when it listed, comes in the midst of a Wall Street IPO boom.

So far in 2020, 223 companies have listed in the US and raised $US88 billion – already well ahead of the 211 floats in 2019 which raised $US62.5 billion.

Nuix well placed in technology sector

Nuix is ideally placed to be a great float – it is in the hot technology sector which has benefitted from the pandemic as consumers have rushed to embrace new ways of doing business.

In the case of Nuix, it is now used around the world to manage cyber security, risk and compliance threats and investigate fraud using its own data analytics engine.

Unlike many floats, Macquarie holds a massive 65% of Nuix on its own balance sheet and looks set to make a massive profit compared to its original cost for the stake.

Those who have attended investor roadshows for the float which were led by Nuix chief executive Rod Vawdrey, said the company has revenue for the year ending on June 30 above $176 million.

Revenue this fiscal year is likely to be above $200 million and technology valuations have been very lofty, particularly for companies that are still growing fast.

Valuation is an open question

A valuation of ten times forecast revenue is not out of the question and could even range much higher given that some of the other ASX Listed technology stocks such as Afterpay (ASX: APT) have traded at 28 times forecast revenue after its results were released.

Analysts are now pencilling in a big float profit for Macquarie which will be a welcome relief for the company after pandemic uncertainty caused it to not provide full-year guidance to investors for the first time since the global financial crisis as the global investment bank revealed it expects earnings for the current half to dive by 35%.

Nuix has yet to outline dates for a prospectus being lodged for its public float but the company has appointed Morgan Stanley and Macquarie Capital to manage the IPO.

Most analysts are expecting the sale to proceed in the first half of next year.

Long list of coming floats

The IPO list in Australia is fairly impressive, although many are smaller companies compared to some of the large companies floating in the US.

On the larger side there is Nuix and the similar sized Dalrymple Bay coal terminal and law firm HWL Ebsworth.

Some of the many smaller companies hoping to list include Adore Beauty, BikeExchange, Plenti (which used to be called RateSetter), non-bank lender Harmoney, online lender Lendi, Fintech debt collector Credit Clear and drug developer Clarity Pharmaceuticals.