TechLahore

Going public can be a knife that cuts both ways. Sure, you get immediate access to lots of capital and liquidity. And yes, as a management team, frankly, you get to tell people you’re the cat’s whiskers for having led your company through an IPO. But, in times when fear is the domninant sentiment and rationality has long been chucked out the window, being public can also mean subjecting your company to the wrath of a hapless, fickle set of investors.

And that, my friends, pretty much sums up where Netsol (NTWK) is right now… at the mercy of fearful shareholders who have decided to launch a selling frenzy.

The net result is that Netsol is an absolute steal at the moment. With annual revenues in excess of $20M, today it stands at a valuation of only $24M. Another Pakistani software company that competes with Netsol, Systems Ltd., never did go public. It happens to be Pakistan’s pioneering software company, and one more in long line of robust businesses that were never taken public. Until very recently, Goldman Sachs used to be one of these lucky few, but not-so-much anymore.

Protected from the public markets, the Systems management team is inifinitely better poised to defend their valuation. Unlike Netsol, they don’t have to justify their existence to every Tom, Dick and Harry who has 93 cents in his pocket to buy a share with. Systems should think long and hard about the opportunity here. Netsol’s management team, some would say, has been its weakness for quite some time – primarily due to perceived transparency issues. Systems Ltd. has had the same CEO, Aezaz Hussain, for almost 30 years!! There is something to be said for executives of such calibre and proven longevity.

If Systems were to step in and buy Netsol, I think they could kill two birds with one stone. Infuse sound management into Netsol while taking out a competitor and developing some serious scale. Think it over, Systems, think it over.

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