LONDON British clothing chain Fat Face (IPO-FFFL.L) said on Thursday it had called off a planned 110-million-pound ($186 million) London stock market listing, as investors become more choosy due to a flood of flotations.
The company, which is owned by European private equity firm Bridgepoint, had aimed to fund its international expansion via the listing of a 25 percent stake, which would have valued Fat Face at 440 million pounds.
Fat Face cited market conditions for pulling the listing, while analysts suggested Bridgepoint sought too high a price for the retailer of clothes targeted at an outdoor lifestyle.
"Fat Face came at a full valuation, on the back of a number of floats that haven't performed great," said John Stevenson, analyst at Peel Hunt. "Valuation is key. At the right price you can get anything away, and it was the wrong valuation."
Bridgepoint holds around 77 percent of Fat Face. A 440-million-pound valuation would have given its stake a value of around 339 million, less than the 360 million it bought the firm for in 2007.
Private equity firms generally hold companies for around 4-6 years before trying to list or sell them on at a profit.
Fat Face began a recovery four years ago after racking up 225 million pounds in pre-tax losses. Bridgepoint brought in former Marks & Spencer (MKS.L) director Anthony Thompson as Chief Executive to steer the company through the turnaround, and injected a further 25 million pounds into the business. Former Marks & Spencer head Stuart Rose joined as chairman in 2013.
Fat Face's core earnings (adjusted EBITDA) rose almost 28 percent to 32.1 million pounds in the 35-week period to February 2, 2014.
The float would have given the firm a valuation of 13.7 times earnings, only a little less than the 14.1 times that its established British peer Next (NXT.L) is trading at.
Investors in initial public offerings typically demand a discount to a firm's peers due to the uncertainty that surrounds a new issuer's subsequent performance.
Thompson said earlier in the month that the proceeds of the IPO would help the company set up a U.S. website and several stores on the east coast of the United States.
Bridgepoint declined to comment. Fat Face was not immediately available for comment.
Four companies including UK discount chain B&M unveiled plans for London flotations on Thursday, but after strong demand for deals earlier this year, the IPO market has grown more turbulent of late.
UK holidays-to-insurance firm Saga IPO-SAGA.L priced at the bottom of its price range on Thursday despite covering the books through both institutions and a retail offering to its loyal base of 2.1 million customers.
Card Factory (CARDC.L) received a cool greeting last week, with shares falling almost 10 percent in their first day of trading.
"What is scary is there has literally been a sea change in sentiment over the past couple of weeks. It's been very, very quick," said a banker who handles equity raising deals. "Card Factory was a bit of a wake-up call."
High-profile consumer floats such as Pets at Home (PETSP.L) and Just Eat (JE.L) are now trading significantly below their offer prices as investors grow more choosy.
"We are just looking at each individual company on its merits," said Andrew Lynch, Fund Manager at Schroders. "There are so many of them now that you can absolutely afford to be very selective."
London has been a hotspot for listings this year, with 30 companies raising $7.4 billion so far in 2014, up 163 percent on the same period last year, according to Thomson Reuters data last week.
"There have been a lot of retail IPOs and they're getting more difficult to do," an analyst said, saying companies needed to stand out from the crowd or have potential to take business away from established competitors.
"Unless the business has a unique selling point or a disruptive business model it's tricky to get away. We contrast that with B&M today - there's still demand for a business like that," said the analyst.
Fat Face's flotation was due to be led by Citigroup (C.N) and Jefferies, with Canaccord Genuity as lead manager and Lazard (LAZ.N) as financial adviser.
(Reporting by Freya Berry; Editing by John Stonestreet and David Stamp)