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Gartmore in disappointing share debut

GARTMORE’s shares made a disappointing debut yesterday, falling by as much as 10p in morning trading after the firm was forced to cut the value of its initial public offering.

The stock closed 1.4 per cent down at 217p in its first day of listing, giving Gartmore a market capitalisation of £666.8m.

The fund manager floated at 220p per share, a fifth lower than the mid-range of 275p it had hoped for three weeks ago, after experiencing weak institutional appetite.

A source close to the deal played down the significance of the dip in the share price, saying: “It happens with lots of IPOs before the shares find their true value.”

However, market observers suggested the pricing cut had a knock-on effect and disappointed investors. One said: “People were surprised that the appetite was so low in terms of price expectations. There is some negative sentiment attached to that.”

In the past the firm has also been criticised for relying too heavily on star European manager Roger Guy.

The fall in Gartmore’s shares following its heavily discounted IPO sent a shudder through the City and will alarm other firms thinking of listing in 2010, such as New Look and Merlin.

Advisers to Gartmore pointed out recent crises in Dubai and Greece made the IPO’s timing difficult.

Around £270m raised from primary issuance will go towards paying off £315m of the group’s borrowings, leaving net debt of £85m.
FLOTATION TEAM
BOFA ML, MORGAN STANLEY AND UBS
The investment banks hired as bookrunners for Gartmore’s offering have had a torrid time. Rupert Hume-Kendall at BofA Merrill Lynch, Dominic Fry at Morgan Stanley and Sam Kendall at UBS have worked behind the scenes with their teams to drum up interest from institutional buyers.

At the start of the process a £1bn price tag was bandied around. Friday’s cut-price offer of 220p per share valued the company at just £676m, disappointing some insiders.

But one dealmaker involved in the process defended the offering, saying: “It’s the only major IPO in London this year, so the achievement is getting a £345m deal done. The only reason it was a bit rocky was the IPO market hasn’t really been open.”