INITIAL public offering (IPO) market is in such a poor state because sellers demand unrealistically high prices, brokerage Numis said yesterday.
Executives believe sellers will maximise the value of their stakes if they offer at a low price initially, allowing the market to build and raise the price in subsequent sales.
“IPOs can allow a firm’s founder to exit, and small sell-downs create support in the market and foster a good quality investor base,” said research head Will Wallis. But if firms look for the top price right away, they can see stock slump and harm their chance of getting a good price in future.
The brokerage called for firms to use fewer bookrunners, arguing the greater the number of banks involved, the higher the price is pushed by competing advisers and the greater the chance of a flop when the stock comes to market.