PAUL MCBETH: No need to shed tears over Rakon departure

Paul McBeth is the editor of The Bottom Line and Curious News, and worked at BusinessDesk for 15 years. He’s owned shares of Rakon since January 2024.

Rakon’s departure from the stock exchange this week is welcome news for patient and opportunistic investors, but it is another reminder of the ruthless ghosting our institutional community indulges in when it feels slighted.

The high-tech components maker was meant to be a billion-dollar company, showcasing New Zealand’s ability to transform from a pastoral paradise to the knowledge economy in the dawn of the new millennium.

It went public in 2006, raising $10 million of new money and giving the founding Robinson family a juicy $56 million payday from the decades of work building the company into a global player in the niche market of crystal oscillators.

At the time, those little crystals formed the bedrock of the global positioning systems sweeping the world. Cast your mind back – if you can – to a time when we threw out the reams of paper maps filling up the glovebox for a handy little device to help us navigate the windy roads of our lives.

The advent of the smartphone only seemed to make the opportunity even bigger – little could we have known how those tiny devices would encroach on every aspect of our lives.

I never thought she’d let me down

For Rakon, however, that explosion undermined its position in the GPS space as the niche became commonplace, and its customers decided that close enough was, indeed, good enough.

Throw in the purchase of a factory in China when leverage went out of fashion, and the crash back to earth for the components maker was hard.

Rakon’s 2006 initial public offering price of $1.60 a share was quickly bid up to $5.80 in a flurry of mid-2000s exuberance, before a decade of sub-$1 prices set in.

The founding Robinson family found itself at odds with the New Zealand Shareholders’ Association, with then-chair John Hawkins successfully leading the ejection of marketing director Darren Robinson from the board, theoretically reducing the family’s outsized influence on the company relative to their holding.

Institutional investors lost their patience with the firm, exiting their positions and withdrawing research coverage of the stock, before Forsyth Barr expanded into unloved areas of the market a few years back.

This is what I saw through

That left it up to the remaining investor base to do their own homework, something they should always do anyway. It also probably meant many commentators missed that Rakon was hedging its bets, with its nifty componentry finding its way into the blossoming world of 5G mobile tech and the oh-so-sexy space scene and artificial intelligence infrastructure.

And in the March 2026 year, Rakon generated annual revenue of $128.8 million to deliver earnings before interest, tax, depreciation and amortisation of $20.3 million. Go back to its listing, and the company was projecting revenue of $73.3 million and earnings of $11.4 million in the March 2006 year.

That might sound like a hefty jump, but it’s really just keeping its nose ahead of inflation.

In much the same way, California-based Bourns ponying up $356 million for Rakon was a juicy 72% premium to where the shares were trading and well north of the $170 million market capitalisation of the 2006 IPO, even accounting for the $65 million equity raising for the Chinese factory in 2009 and the $14.1 million injection from Taiwan’s Siward Crystal Technology in 2016.

But for those patient ones who’ve been there the entire 20 years, it’s not really a compelling return, with the $1.55 offer price closer to squaring up, provided you ignore the time cost of money.

I should have known it from the start

For Rakon, a deal seemed likely once Brent Robinson strong-armed a boardroom refresh last year.

The company had been shopping itself around for a few years, with an earlier offer of $390 million by Apple components supplier Skyworks said to have fallen through due to the Kiwi firm’s Chinese customers – a no-no in a world of heightened competition between the superpowers.

With the Bourns offer falling within independent adviser Calibre Partners’ valuation range of $1.46-to-$1.94 per share and the deep-pocketed owner having the capacity and appetite to fund capital-hungry growth initiatives, it was hard to see the deal getting derailed.

Rakon’s owners, including this one, voted with their feet – and potentially some nudging from the larger shareholders – with 97.6% accepting the offer, leaving a small contingent for the Californians to mop up using Takeovers Code provisions.

It’s easy to bemoan another exit from the NZX as a sign of the poor health of the stock market, but just because a company goes public doesn’t mean it’s there permanently.

I turn away as you close the door

Takeovers are the ultimate arbiter of a company’s value and an important part of a vibrant capital market. That cash that shareholders pocket doesn’t just wind up getting poured into the latest rental property.

And Rakon had lost the confidence of the institutional investment community, which saw that all-important market liquidity dry up to a trickle through the 2010s and only briefly spike up when there was talk of a takeover.

As soon as trading activity starts to tumble, the increasingly large KiwiSaver funds can’t move in and out of those smaller firms, effectively taking them off the table as viable investment options unless they were to treat them akin to illiquid private assets.

With more consolidation on the way among the wealth managers and Jarden increasingly looking west to expand its investment banking arm, there are a growing number of opportunities for the boutique shops out there to plug the gaps needed to breathe life into our local capital markets.

Rakon might not have lived up to the investor expectations heaped upon it in the mid-2000s, but it highlighted the value of the niche through its 20 years on the public markets and that’s a lesson that everyone can appreciate.

Image from Albert Stoynov on Unsplash .