London’s not alone in feeling the heat on IPOs
IT isn’t just London that’s having a sticky time with its new issues market. On Friday in Madrid Spanish telecoms giant Telefonica cancelled the planned IPO of its Atento call centre unit. The decision to pull the deal came after much prevaricating, including a lowering of the price range by close to 10 per cent on Thursday. Observers said the price cut was too little, came too late and could not make up for the overall lack of interest in a market low on confidence.
“You shouldn’t ever get into the position of cutting a price range without being sure to get the deal done,” said a banker yesterday.
Spain’s market undoubtedly suffers because of the sovereign debt concerns of the country – not something that is affecting the UK – and the failure of Atento doesn’t augur well for deals pencilled in for later in the year to recapitalise the country’s banking sector.
The two biggest transactions listed so far are Bankia, the group that was put together as a result of a series of savings bank mergers, which is seeking to raise between €3bn (£2.6bn) and €4bn with its own IPO in mid July. And Banca Civica, a smaller rival, plans to raise up to €1bn at the same time. There will be an increasing amount of attention on these two deals in the weeks ahead.
STJ Advisors, the St James’ Place-based specialist IPO adviser group, is working alongside Lazard on the Bankia deal and also advised on Atento.
Last week we revealed documents that showed how STJ plays hard ball with the bank bookrunners on deals, accusing them of talking down valuations.
Some bankers (not too many) have since expressed support for STJ and its head John St John in particular. But many have expressed the view that our articles last week – War in the City on the cityam.com website – highlighted a problem for bookrunners who are being squeezed at both ends of the deal.
There will rarely be a single reason why an IPO gets pulled; rather there is generally a confluence of factors.
London is still open for business: witness the giant Glencore flotation, London’s largest ever, and the decision last week by Ophir Energy to float in the UK. But there is so much competition out there, there is no time to lose in banging a few heads together.