LONDON May 16 Lukewarm demand for shares in
British greetings card retailer Card Factory Plc is
the latest indicator that interest in European company
flotations may be cooling somewhat after a red-hot start to the
Having seen the busiest period for initial share offerings
(IPOs) since before the financial crisis of 2008-2009, investors
may be getting more choosy about the stocks they buy into,
forcing a number of companies to withdraw listing plans or scale
back the price they are looking for.
With a number of high-profile offerings in the works,
ranging from banking group TSB to shoemaker Jimmy
Choo, companies looking to raise capital - and the
advisers helping them do so - will be hoping any setback is
temporary and stock specific, not a broad-brush aversion.
"I think IPO investors have become a bit more fickle," one
banker who works on flotations said. "Markets are at all-time
highs. Sentiment towards IPOs? Probably not."
Card Factory shares have fallen over 11 percent below their
issue price since their London stock market debut this week. The
company, owned by private equity firm Charterhouse - and whose
flotation was managed by Morgan Stanley, UBS,
Nomura, Investec and STJ Advisors - was
trading at 199.25 pence by 1421 GMT in conditional dealing.
They had been priced at 225 pence on Thursday, already at
the bottom of a previously set price range.
Conditional dealing allows banks and brokerages to trade
shares between themselves and stabilize the price of an IPO
before the stock is issued to the public markets.
Card Factory's decline is seen by bankers as a negative
since companies target an uptick on their debut, to reward
investors who risked their money by buying into the offering,
while not underpricing the stock.
A rise of 5 to 10 percent is seen as ideal by many
For companies like Card Factory, flotations have become more
viable this year because Europe's IPO market has experienced a
surge in activity.
London has been a particular hot spot as firms seek out
capital from yield-hungry investors, and private equity groups
cash in on strong equity markets to exit investments made before
UK-based retailers Poundland, Boohoo and
Patisserie Valerie have all floated in recent weeks.
Proceeds from European IPOs have risen 248 percent in the
year so far against the same period last year to $24.9 billion,
the strongest level since 2007, Thomson Reuters data showed this
week. The UK has seized the lion's share, with $7.4 billion
raised in 30 listings.
Yet there are signs that investor appetite may be waning.
Last week Dutch-based Domus, which holds properties in the
Czech Republic, withdrew its planned Amsterdam flotation, citing
market and geopolitical conditions.
Israeli digital advertiser firm Matomy, which scrapped its
IPO in April after it could not meet UK listing requirements
that 25 percent of shares be held by European investors.
Some said that rather than being a general withdrawal from
the market, investors were simply being more selective.
Bankers also say the pipeline of prospective new issues
remains strong, with the bigger players saying they have between
10 and 20 European listings lined up before the summer holidays,
when the market traditionally quietens.
Major names including over-50s holidays-to-insurance firm
Saga as well as TSB are seeking to float in coming
months and could prove popular.
Elsewhere Europe's largest online fashion retailer Zalando
is eyeing a possible listing in the third quarter, while outside
Europe China's Alibaba recently published a
prospectus for what could be the largest technology debut in
"The observation from the trading floor is one based on
quality," said Marc Kimsey, senior trader at brokerage Accendo
Markets. "We are experiencing an overwhelming response to legacy
brands such Saga and TSB."
(Editing by David Holmes)