THE waters surrounding London’s new issue market are not just choppy at present but seemingly infested by sharks. In the past couple of weeks bank advisers have been forced to pull the flotation of two strong companies, Topaz Energy, the Dubai-based oil services group, and the vacuum technology company Edwards. In both cases the decision went to the wire but advisers decided to take the least risky course of action, citing a multitude of excuses including the Japanese earthquake, middle eastern unrest and a crowded offerings queue.
In the case of Perform, the media group in which Len Blavatnik holds a significant stake, the advisers headed by Morgan Stanley’s Emmett Kilduff and Credit Suisse’s Nick Williams, decided to press ahead with a flotation even after a delay caused by confusion over betting legislation.
Perhaps the bankers are privately ruing that decision (though I suspect Blavatnik, who sold £150m worth of shares in the transaction, will not be too unhappy). One banker said: “I’ve rarely seen an IPO perform this badly,” as shares in the group fell from the 260p issue price to 210p yesterday. International Financing Review (IFR) says 33.2m shares were traded on the first day, with some saying many investors exited. “What the banks should have done is re-price the issue completely, not just bring it down by 10p,” said the source. Kilduff maintained yesterday the banks were right to have gone ahead, making Perform the first successful UK IPO of the year.
Later this evening advisers from Morgan Stanley (again), Jefferies and Bank of America Merrill Lynch, will decide on whether to price shares in the online payments group Skrill. Morgan Stanley’s Simon Smith could be forgiven for feeling a tad nervous.
Meanwhile it has been suggested to me that the bulge bracket banks are increasingly interested in hiring top talent in equities from the smaller, boutique banks. Hence a few weeks ago RBC swooped on Arden’s financials team, led by Jeremy Grimes and Sarah Spikes. This week I have been drawn to mention the recent hire by HSBC of Peter Hitchens, a top oil and energy analyst from Panmure Gordon. The likes of Panmure and Arden will always struggle to pay the kind of money that the bigger banks can, especially those like RBC who seem to have massive spending power. The boutiques can simply pay competitively against each other and hope that their convivial approach to business convinces their best people to stay rather than be seduced by the trinkets of gold on offer elsewhere.