IT might be snowing in many parts of the UK but there are signs at last of a thawing in London’s new issues market.
Insurance group Direct Line paved the way last year when its owner RBS sold a stake in the group via a public sale of shares into a market that had hitherto been seen as largely closed. That IPO, advised on by Goldman Sachs and others, has been followed this year by enthusiastic and successful offerings from the likes of housebuilder Crest Nicholson, estate agency group Countrywide and another insurer, Peter Wood’s Esure.
If London Eye and Madame Tussauds owner Merlin goes ahead with a London flotation later this year, that will surely be proof enough that the market here is once again alive and kicking.
Three years ago Merlin and a host of other private equity-backed companies were forced to abandon London flotations because of a volatile equity market and a disillusioned investor base.
Investors such as Andy Brough at Schroders and many more besides became fed up with buying stakes in companies they felt were over-priced, especially those with a private equity seller at the helm. Many of them went on a so-called buyers’ strike. After being stung by issues such as Ocado, Betfair and Promethean World, many resolved to investing their cash in tried and tested stocks.
Now, thanks to some sensibly priced and well marketed new issues, there are signs of a return to normality. But the market's new found confidence is still wafer-thin, I would suggest.
Despite the welcome change in climate, companies like Merlin are unlikely to be able to price their assets as high as they would like in London and, given that much of its trading focus is shifting to the US and Asia, a listing here is likely to be anything but a done deal.