IPO hopeful Cuscal flips to back-end bookbuild amid market volatility
ASX aspirant Cuscal has locked in a back-end bookbuild process, bowing to investor concerns about having their funds locked away for several weeks amid increased market volatility, Street Talk understands.
Sources claimed the end-to-end payments outfit and the pricing of the mooted initial public offering had been well received by investor domestic and overseas investors following a whirlwind global tour. However, it is understood interested parties voiced concerns about the unfolding crisis in the Middle East and the front-end bookbuild which would see their funds held for three weeks.
Cuscal connects 87 small banks, non-banks and fintechs to the payments system. iStock
A back-end process dramatically narrows the period between an investor’s allocation of funds and trading to a handful of days, transferring the risk to the company.
Cuscal’s advisers Bank of America have fixed the IPO price at $2.50 per share and are positioning the company as a defensive opportunity. This equates to a $367 million offer size (a primary issuance of $75 million and a selldown of $292 million) and a market capitalisation of $514 million.
The two-day bookbuild will be held on November 21 and November 22. Cuscal’s shares are expected to commence trading on the ASX on November 24. Cuscal has tapped Bell Potter and Ord Minnett as co-managers. Bank of America is sole lead manager.
Back-end bookbuilds are the global standard for IPOs and have been used by large Australian IPOs like Medibank Private and Aurizon. In simple terms, the process starts with lodging a prospectus, issuing a price range, running a roadshow, kicking off the retail offer, completing the bookbuild and listing within a few days. The last company to employ this process was GQG Partners in 2021 – unsurprising seeing as it’s a global asset manager is based in Florida.
Front-end bookbuilds start with the roadshow, followed by the bookbuild (underwritten by the banks), then the prospectus and the retail offer period – generally seeing investors funds locked away for weeks. This process is considered less investor-friendly as they bear the market risk and is widely used by smaller companies – often those who are price sensitive and/or have less conviction in listing.
Cuscal is an all-around payments processor and bank card issuer, used by financial services companies like AMP, ING and Australia Post. The company’s decision to push ahead comes as other ASX aspirants delay their listings until next year, hoping for more favourable trading conditions,
Cuscal’s owners – MasterCard, Bendigo and Adelaide Bank and most of the big credit unions – would have their fingers crossed they can get away 2023’s second-biggest IPO after Redox.
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