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UK IPO market going off the boil?

Friday, May 23, 2014 - 02:21

May.23 - Zoopla, Saga, B&M and Wizz join the rush to share listings and, it's rumoured, Lloyds may do so next week to sell off part of TSB. But clothing retailer Fat Face has pulled out - prompting some to ask whether the IPO market is running out of steam. David Pollard reports.

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It's big business. The UK property market - especially in London - is not just bringing riches to sellers. Property websites are getting fat on it too. And now, Zoopla says it plans to join insurer Saga, retailer and B&M in a wave of companies listing their shares on the stock market. Conditions for flotations right now are calm, perhaps deceptively so, says BGC Partners' Mike Ingram. SOUNDBITE: Mike Ingram, Market Strategist, BGC Partners, saying (English): ''We've mentioned a bit of event risk in the form of Ukraine and perhaps European elections, and yet, at the end of the day, you know, markets seem relatively calm with whole thing. I think at some point, something's going to break.'' Many look back to the Royal Mail flotation - and the huge gain in its share price since - as reawakening IPO appetite - above all for smaller investors. Even if the UK government was charged with underselling its stake for the benefit of bigger institutional investors. A bevy of retailer listings including BooHoo and Poundland also saw strong demand. But each IPO has its risks. Shares in AO World are down by more than 40 percent since they joined the market, Just Eat by 25 percent, as investors get more choosy. Retailer Fat Face has called off its listing - and Saga priced its shares right at the bottom of its offer range - one banker on the deal warning they would ''barely'' sell. SOUNDBITE: Mike Ingram, Market Strategist, BGC Partners, saying (English): ''You're certainly seeing signs of fatigue out there. There's certainly an element of opportunism in the IPO market. You can see a lot of VC exits, a lot of private equity exits, a lot of companies where the principals are selling out, and certainly in some sectors, and I'm thinking principally of TNT, a lot of very rarefied valuations, so yes I think there is a frothy element to it.'' One rumoured flotation next week does appear in favour. Lloyds is expected to sell a quarter of its TSB business - though with pricing expected below book value. SOUNDBITE: Mike Ingram, Market Strategist, BGC Partners, saying (English): ''I have seem some numbers, as yet unconfirmed pro-forma which suggest that you know TSB as a standalone business is quite attractive. And I think that if there was a flotation at this time, then it's likely to be quite well-received, obviously subject to price.'' There's an old stock market adage: sell in May and go away. If IPO fatigue is setting in, it appears some investors may be doing just that.

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UK IPO market going off the boil?

Friday, May 23, 2014 - 02:21