Ocado reels as rival IPO fails
OIL and gas group Fairfield Energy last night pulled its upcoming stock market flotation in a move that further undermines the chances of online grocer Ocado floating at a sky-high valuation of £1bn.
Fairfield was hoping to raise £330m as part of its flotation but on Tuesday it became clear that the group’s advisers were having trouble garnering support.
Yesterday sources said the group had firm takers for around half of the new shares on offer but this was deemed insufficient for the transaction to go ahead even at the lower end of the price range.
Analysts said that the shock decision to pull the Fairfield deal, mainly on grounds of volatile markets, was bad news for Ocado.
Analysts have queried the £1bn valuation Ocado’s advisers are hoping to achieve.
Says Clive Black, Shore Capital’s head of research: “Markets are very volatile at the moment so any kind of fundraising is tricky. Fairfield pulling its flotation doesn’t help Ocado. It’s a bad context to try an IPO. It’s not only Fairfield that has had to pull – you have to remember New Look earlier this year.
Black added: “But our main problem remains the price. It’s simply too much to invest in at that level and they need to lower the value. Will the IPO go ahead? We will have to see what comes out of the US. I believe they are over there speaking to some big investors and this will really be the key to whether they can get it away or not.”
Although fund management group Jupiter Asset Management managed to get its flotation away last month, albeit at a reduced price, there have been some high profile casualties this year of the nervous market conditions.
The retailer New Look and the entertainment group Merlin were both forced to pull IPOs earlier this year.
Susan Walker, head of the Quoted Company Team at KPMG said:?“Ocado has its own specific considerations but it does have a strong brand and it is a household name. It may struggle to meet price expectations, though, and in the end it will come down to whether existing shareholders will be prepared to accept the dilution that will come from pricing at a lower level.”
Many felt Fairfield would have little difficulty getting its issue away but it is the second time the group has tried and failed to float this year. Fairfield’s board met last night to discuss its options. Ocado said last night its float was going according to plan. “The Ocado team have had a great reaction in the US,” a spokesman said.