Sovereign Cloud Holdings Ltd (ASX: SOV) shares have started off on the right foot following their ASX debut today. The cybersecurity provider listed its shares as part of an initial public offering (IPO) at a price of 75 cents per share. Just moments after floating however, the company’s shares had risen by more than 50%.
At the time of writing, the Sovereign Cloud share price is trading at $1.11, representing an overall gain of 48% so far today.
More about the Sovereign Cloud IPO
Sovereign Cloud has today floated 26.67 million shares at the price of 75 cents per share, raising gross proceeds of $20 million.
The company’s trading name, AUCloud, is a sovereign Infrastructure-as-a-Service (IaaS) provider, targeting cloud-based computing services to the Australian Government, Australian Defence Force, and to the Critical National Industries (CNI) such as financial services, telecommunications and utilities.
According to the company, the Australian Government is embracing digital transformation with plans to bring its services online by 2025.
Both the Australian Government and ADF have announced increased expenditure on information and communication technology (ICT) and on digital and cyber security over the coming decade to 2030.
The company estimated that Australian Government ICT spend will be in excess of $13 billion per year, after a recent government announcement saying it will spend an additional $21 billion in special ICT projects over the next decade to 2030.
Digital transformation has been fast-tracked for a number of reasons, including an increasingly distributed workforce as a consequence of COVID-19, and increased focus on data security concerns due to heightened geopolitical tensions.
Sovereign Cloud said it has positioned itself to capitalise on the Morrison government’s efforts to bulk up its cybersecurity strategy, announced in August.
The company advised it would use the fresh funds for working capital to execute its strategy during its early revenue phase.
Sovereign Cloud’s financials
On its prospectus, Sovereign Cloud reported it had incurred losses since inception, as the company invested in and built its cloud-based technology platforms at data centres in Canberra and Sydney.
At 30 June 2020, the gross value of tax losses carried forward totalled $16.4 million.
At the IPO price of 75 cents, the company commands a market capitalisation of $74.7 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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