London’s new issues market is thawing, but slowly

David Hellier
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Not so long ago I asked an investment banker in London how long he and his colleagues had deliberated before deciding to float a Salford-based materials technology company called Luxfer in New York.

“About 30 seconds,” he said, quickly and pointedly. But then this was October last year and the new issues market in London was effectively closed to all bar a few rare exceptions.

Today one hopes the decision-making process might have taken just a little bit longer.

The prospects for London’s new issues market are looking healthier by the day, thanks to the recent successes of the insurance group Direct Line and more recently the housebuilder Crest Nicholson.

Most importantly the shares of both companies are trading above the issue price, with Direct Line shares 23p above the level they listed at last December and Crest Nicholson shares at 39p above their 259p issue price.

Obviously no company wants to price its shares too low when it comes to the market simply for the sake of helping attract buyers to future issues.

But much of the negativity hanging over London over the IPO market stems from a series of issues that have been disastrous simply in share price performance.

Speak to jaundiced fund managers and they will assail you with the names of Ocado, Promethean World, Betfair and Perform, each of them responsible for their decision not to go near new issues for the past few years.

As Schroders’ Andy Brough told me yesterday: “There’s been some progress but we really need three to four successes to make us truly confident. As long as everybody’s leaving the party with a balloon, then the IPO market will have a chance of coming back.”

Bankers say those working on IPOs are working hard to ensure investors find no surprises, something they should have obviously done in the more recent past; that they know exactly who’s selling shares, who is being locked in and there’s a certain confidence about trading going forward. The banks with wide geographical networks are also making sure that an issue doesn’t depend too much on the London investment pool, which is complemented by investors globally but especially in the US.

According to one investment banker there is still a way to go: “It feels like we’re dipping our toes in the water. But these are not unfamiliar names that are coming to market and it is too early to say whether things have fully changed.”

Leaks and probes

Robert Swannell, the chairman of retailer M&S, was sufficiently stung by the recent leak of its Christmas trading update that he ordered an investigation into who was behind the release of price-sensitive information that was broadcast by my colleague Mark Kleinman on Sky News.

No leaks yet, however, as to whether the inquiry is complete and M&S is not heeding my recent advice to be more open. There was a strict no comment from the group yesterday.