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Megaport shares rocket on ASX debut

Shares in Megaport (ASX: MP1) soared today after the latest technology company to hit the ASX lifted to $1.95 around 56% above the initial public offer price of $1.25 per share.

The business raised $25 million under the terms of the prospectus and at the offer price Megaport would have a market capitalisation of $87.5 million, although it is now around 56% north of that.

The company’s prospectus states that its aim is to become a global leader in elastic connectivity and network services interconnection in response to customer demand for flexible bandwith services around Australia and internationally. Its operations are based in Brisbane and it currently has over 200 active customers and has also signed partnership agreements with major cloud services providers and network providers in all markets in which it operates.

In simple terms the company uses what it calls elastic or variable interconnections to allow clients to right-size their connectivity and data use on a customised basis. In other words an enterprise client like electronics retailer JB Hi-Fi Limited (ASX: JBH) can simply ramp up its bandwidth for a given period of time just as it requires more capacity. In exchange JB Hi-Fi will pay Megaport fees for helping provide these kinds of services.

The company currently operates in six markets and four countries and aims to use the cash raised to expand globally with North American and European markets in particular a growth target. For example this sort of expansion requires funds for new staff and marketing costs, with the business attempting to capitalise on what it sees as a first mover advantage in an emerging technology space.

Investors clearly like the prospects of this business and it’s not hard to see why. It looks deserving of a spot on the watch list for investors interested in technology companies.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

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Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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