Demand for Orion IPO 'extraordinarily strong'

An entity associated with Orion chief executive and founder Ian McCrae (left) will sell shares worth $5 million in the initial public offering. Photo / Dean Purcell

Demand for software developer Orion Health's initial public offer has been "extraordinarily strong" and retail investors may end up with a much smaller share of the stock then they initially hoped for, according to a market source.

The bookbuild for Orion's up to $155 million IPO kicked off earlier today. A bookbuild is an auction style process where institutional investors bid for shares in order to set the final pricing of an IPO.

The source said demand from institutions had been so strong that retail investors might only end up with around 10 per cent of the shares they had requested.

Last week Orion released an indicated price range for the IPO of $4.30 to $5.70 a share, which would give the company a market capitalisation in the range of $720 million to $915 million.

An announcement on the offer's final pricing is expected tomorrow.

The IPO will raise up to $155 million, which the Auckland-based firm will use to fund growth including an expansion of its research and development capabilities.

Orion's technology facilitates the sharing of information between hospital departments, healthcare providers and health professionals.

Orion posted revenue of $153 million in its last financial year but has been making losses as a result of investments for growth.

The company reported a loss of $14.8 million for the six months to September 30 in its IPO prospectus, which did not include any earnings forecasts because the company decided its "lumpy" revenue made providing accurate guidance too difficult.

Ian McCrae, who founded Orion in 1993, is expected to retain a roughly 50 per cent shareholding in the firm following the IPO.