MF Global pricing hit by subprime worries: Man CEO
LONDON (Reuters) - The lower-than-targeted pricing for the flotation of MF Global (MF.N), the U.S. broking arm of hedge fund firm Man Group (EMG.L), is a "compelling price" in markets hit by subprime concerns, Man's chief executive said.
The price was below the indicative range because "the market in the U.S., in particular for financial institution stocks, is weak," Man CEO Peter Clarke told Reuters in an interview on Thursday.
"The backdrop to financial institution weakness does appear to be subprime ... The investor base in the U.S. is seeking to reduce rather than increase exposure to financial institution stocks."
MF Global's initial public offering (IPO) priced at $30 a share, well below an indicative price range of $36 to $39, raising $2.9 billion. Despite the price cut, it was still one of the biggest U.S. IPOs of the year.
The float comes amid growing concerns about the surge in defaults in the U.S. subprime mortgage market and its wider influence across markets including on alternative investment vehicles such as hedge funds and private equity firms.
"Am I disappointed? No ... The exit multiple of 23 times underlying earnings is a compelling price for a separation ... It's the best price for shareholders in this environment," Clarke said.
"Our shares are up. That's agreement that executing the strategy was the key."
Man Group shares rose as high as 616.5 pence in trading on Thursday, although they closed 0.3 percent lower at 601 pence.
At 1540 GMT MF Global shares were 7 percent lower at $27.91.
