German cable firm slips on market debut

City A.M. Reporter
Shares in cable television company Kabel Deutschland languished on their debut in Europe’s biggest flotation so far this year, as wary investors balk at high valuations pinned on new listings.

Germany’s largest cable operator raised €759m (£681m) for US owner Providence Partners in its initial public offering on the Frankfurt stock exchange, towards the lower end of the range.

Although the heady pre-crisis days of new issues jumping 10-20 per cent on their market debuts are long gone, the fact the shares made little headway underscores just how cautious and price sensitive investors are in the wake of a spate of downsizings and postponements.

“Investor sentiment has improved moderately, but it continues to be finely balanced on the basis of price,” said one head of European equities at a large fund house in London, asking not to be named.

“There is potential for the market to absorb new listings, but if the pricing is not right, deals could still fail.”

KDG’s debut is closely watched by market participants trying to gauge appetite for private equity led flotations. Chemical distributor Brenntag, which hopes to raise as much as €837m in an IPO that values it at an 18 per cent to 24 per cent discount to its peer Bunzl, is due to announce the result of its IPO on Friday.

Last month, Travelport and New Look pulled their IPOs, while recent debutants Promethean World, African Barrick Gold, and Rusal and Gartmore are all trading below their IPO price. Only five of this year’s 12 European IPOs are trading above their offer price.

“We must not forget, just because KDG happens doesn't mean every companies can launch. Otherwise we’re going to end up where we were in January when some people rushed,” said a London banker.

Shares in Kabel Deutschland were trading at €22.17 by 2pm yesterday, having opened at €22.50. They finished the day at €22.24.