Inside Track: Bankers ponder early holidays as latest IPO is left on the shelf

 
David Hellier
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THERE was always an inevitability to what is currently happening in London’s new issues market.

A spate of issues flooded the market at the beginning of the year, some a touch overvalued. A number of the issues traded down, leaving investors nursing losses and accusing the sellers of assets as being too greedy.

Now, not surprisingly, the market is being increasingly choosy about which stocks to back.

The discount chain B&M did very well, thank you, supported by an enthusiastic overseas fan club which picked up around 50 per cent of the shares on offer.  

There was a market, too, for EasyHotel, an offshoot of EasyGroup, but the share sale was only half as large as planned.

And then there are the companies that just can’t get their floats away, such as Wizz Air, Liberty Living and Fat Face, part of a growing list that was yesterday joined, as first revealed in City A.M, by Shelf Drilling.

In the current nervous environment, Shelf Drilling, a Dubai-based oil rig supplier, had little going for it apart from some healthy revenue figures.

Its three private equity owners hoped to sell down $250m of their equity, having been backers of the group only since the tail end of 2012.

The group owns a collection of rigs which some investors felt were too old for an oversupplied market.

Bankers say potential investors were (in their eyes wrongly) too concerned by their perception of rig rates coming down, with many favouring new rigs instead of the old ones that Shelf owned.

Shelf’s backers felt there were enough doubters of the business case to make them pull the deal.

So has the latest issue to be shelved dented the market for new issues in some way?

It has certainly made it more nervous, as did the pulling last week of Liberty Living, the student accommodation group.

For some deals, this means they will be held back and postponed until investor confidence returns. Others will go ahead. The SSP catering group lists soon in what is expected to be a reasonably supported offer.

Bankers who are advising on peripheral deals might well get to the beaches early to enjoy some rest after what has been, for most, an encouraging year so far.

But few think that the complete closure of the IPO door is with us just yet. It’s just that the market is far more discerning than it was several months ago and the euphoria of the early months of the year is unlikely to return for a while.

david.hellier@cityam.com