OzForex to debut on ASX

Disruptive foreign exchange services provider to list on ASX in early October

OzForex, a provider of foreign exchange services to retail and small to medium enterprises, is expected to list on the ASX on October 11 with a market value of $480 million.

That would make OzForex the biggest purely local float on the ASX this year, if you exclude the dual listing of New Zealand’s Mighty River Power (ASX: MYT), and above the listing of Virtus Health (ASX: VRT).

OzForex is seeking to raise around $440 million through the issue of 219.7 million shares at $2, with founders Matt Gilmour and Gary Lord holding onto a 4% stake each. Both will make $84.5 million from the float, having started the business more than ten years ago.

The main premise of OzForex is to provide foreign exchange (FX) services to retail and smaller customers who were getting ripped off – according to Gilmour – by the banks. As a ‘disruptive’ service, there’s likely to be huge demand for shares in the IPO, and no surprise that the offer is priced at 21.7 times 2014 forecast earnings. While OzForex has no direct listed competitor, it has been compared to online businesses REA Group (ASX: REA) and Seek (ASX: SEK).

OzForex reports that it handled $9.1 billion in FX transactions last year, with 460,000 funds transfers and 2 million website visits each month.

Unfortunately for retail investors, up to $40 million of the float is likely to be offered to them through broker offers and not open to the general public. But the deal won’t be for everyone, with the funds raised in the IPO going to existing shareholders, including Macquarie Group (ASX: MQG), The Carlyle Group and Accel Partners. Many investors are wary when the funds from an IPO are paid straight to the sellers, especially when private equity firms are involved.

Foolish takeaway

The big four banks are rumoured to be preparing competing services by early next year, but OzForex may have gained the first-mover advantage, putting it in the box seat. With plenty of growth potential, including from its offshore subsidiaries, this is a company to watch.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool writer/analyst Mike King owns shares in Seek.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More on ⏸️ Investing