* Polish cable firm Multimedia latest firm to pull listing
* Souring mood may affect impending deals including TSB
* Investors say market frothy due to number of deals
* $25.3 bln raised in 2014, triple the figure a year earlier
By Jemima Kelly, Freya Berry and Simon Jessop
LONDON, May 29 Spoilt for choice as companies
rush to list their shares in Europe, investors are getting more
choosy over where they park their money and are turning away
from businesses with the most questionable valuations.
Polish cable operator Multimedia became the
latest firm to call off an initial public offering (IPO) on
Thursday because of weak investor demand, joining companies
including UK clothing chain Fat Face and Dutch property vehicle
The cancelled listings are making investors more cautious
and reining in price expectations for major listings such as
British discount retailer B&M (IPO-BMRL.L) and bank TSB, which
want to sell their shares before the European summer holidays in
case a so-called "IPO window" slams shut.
That window opened last year as an improving European
economic outlook and cheap money released by central banks since
the financial crisis drove big gains in European stock markets.
Total IPO share issuance in the year to date is $25.3
billion from 85 deals, more than triple the same period of 2013,
with nearly a third raised in London.
The pick-up in IPOs has accelerated in recent months as
shares extended their gains. But the prospect of interest rates
being raised from record lows and lingering concerns over
Europe's economic recovery are clouding the outlook for equities
and investors are becoming more selective on new listings.
"Generally we have found deals rather expensive with too
little upside left for the buyer," said Nicholas Melhuish, head
of global equities at French asset manager Amundi, which has
bought into just one deal this year.
Of those companies that did find enough buyers, some,
including insurer Saga, were forced to price their
shares at the bottom end of market expectations. Others, such as
online firms AO.com and Just Eat, saw their value
fall below their issue price after listing.
Charterhouse's investment Card Factory was another to suffer
heavy losses after it listed, a performance that has checked
private equity's enthusiasm for bringing investments to market
and encouraged it to seek alternative exits.
Last week, Apax scrapped plans to list foreign
exchange business Travelex and opted to sell it outright, while
Bridgepoint pulled its planned listing of Fat Face.
"The market is heavily saturated and investors are
experiencing fatigue with a lot of the issues that are coming to
market," said Bertie Thomson, senior investment manager at
Aberdeen Asset Management.
"The lofty valuations of the majority of stocks we've done
due diligence work on meant it has been very hard to get excited
on a risk-reward basis," said Thomson, whose sole IPO purchase
this year was Isle of Man-based Manx Telecom.
Card Factory's troubles have also led to concerns that
fellow high street retailer B&M could face pricing pressure in
B&M "is a good business," a banker said. "Does Card Factory
hurt it? I would hope not. Will it get the same valuation as it
would three months ago? Probably not."
A retreat in the stock market value of some smaller and
medium-sized companies, particularly in Britain, appears to have
increased their allure at the expense of new listings.
"The attractions of existing (listed) companies are now
greater than they were three months ago," said David Lis, head
of UK equities at Aviva Investors, "which means if you want to
get these IPOs away you're going to have to price them much more
cheaply than might have been the case a few months ago."
The FTSE mid-cap index is trading down 0.5 percent
in 2014 against a 1.4 percent gain in the blue-chip FTSE 100
. Since its February high, however, the mid-cap index has
fallen 5.2 percent against a 0.1 percent fall for the FTSE 100.
That divergence is less marked among the leading continental
exchanges, however, many of which began their recent rally from
a lower base and are benefiting from a recovery in peripheral
euro zone markets after several years of underperformance.
In contrast with the UK, Germany has seen just two IPOs this
year. The latest, car parts maker Stabilus, rose 9
percent on its first day, while 3D printer SLM is also
trading above its issue price.
The German mid-cap MDAX has suffered less than its
UK counterpart, down 0.5 percent from its January high, while
the blue-chip DAX is up 1.6 percent.
For Geir Lode, head of global equities at Hermes Fund
Managers, the IPO market had become "a little bit like real
estate", with brokers talking up the market and resulting in "a
lot of companies ... rushing lower-quality merchandise to the
Aviva Investors' Lis said that, while there was nothing
inherently wrong with many of the companies brought to market,
they faced a fight for investor cash with listed companies, many
of which are raising cash to fund growth.
"There isn't a bottomless supply of cash and there's too
much supply (of IPOs) in too short a period," Lis said. "And at
the same time there are fundraisings going on as well, so ...
there are a lot of claws on cash."
($1 = 0.5986 British Pounds)
(Editing by David Holmes and Tom Pfeiffer)