Choppy waters in the flotation market

KPMG experts have warned
that the flotation market remains potentially treacherous and depends upon
pinpoint pricing by entrants, after Hogg Robinson returned from the IPO
graveyard last week.

The business travel and corporate services company recently managed to table
a new offering barely a week after its first bid had stalled, but only after
cutting the share price.

Tony Fry, transactions services partner at
KPMG’s Capital Market’s
Group, said: ‘This shows that companies have to be more careful about their
pricing from the start.

‘Hogg Robinson priced their
IPO
very competitively this time around and it’s good news that it’s going ahead –
and it’s good news for the market. They’ve priced it quite a lot cheaper and
managed to find a value that the market thinks is going to be a good investment.

The Hogg Robinson float finally got away this week, with the shares going for
90p each, compared with the first offer range of 140p-220p. The shares
immediately climbed to 99p.

Research issued by KPMG showed that the IPO market as a whole was still
fairly lethargic, citing the fall and instability in global equity markets as
the major factor.

The slump led to a round of cancelled or delayed floats in May and June this
year. In the third quarter of 2006, the mainstay of activity on the Official
List occurred in July,

with Standard Life’s demutualisation and IPO raising £2,235m and Southern
Cross’ rescheduled debut making £220m. There were also two overseas trading
company new entrants: Colt Telecom of Luxembourg (£304m) and the USA’s Napo
Pharmaceuticals (£10m).

David Simpson, corporate finance partner at KPMG’s Capital Markets Group,
added: ‘The third quarter is a traditionally quiet time in the IPO calendar,
although we would have expected the market to reopen in September following the
recovery in equities. It has now become apparent that the setbacks experienced
earlier this summer have yet to be fully overcome.’

Fry said: ‘What we’ve seen over the past couple of years is a number of
companies coming to AIM, some strong, some not so strong. The less robust ones
will still find it difficult to make the transition.’

COMPANY REPORTS

Paper business discarded

Operations at paper business Sandusky Walmsley are to be closed by its
administrators after they failed to find a buyer for the company.
PricewaterhouseCoopers partners Michael Horrocks and Russell Cash announced that
142 redundancies had been made, while the remaining 25 staff will be made
redundant upon completion of work in progress. ‘It is a sad day when the closure
of any business is announced, especially when it involves the loss of so many
jobs,’ said Horrocks.

Apple apologises

Steve Jobs, the CEO of Apple, has apologised to shareholders over the way the
company booked stock options in the past, after an internal probe uncovered
accounting irregularities between 1997 and 2002. The probe also showed that Jobs
was aware of some options backdating, but the company claimed he did not benefit
from them and was not aware of the accounting implications.

The three-month investigation led to the resignation of former CFO Fred
Anderson. ‘I apologise to Apple’s shareholders and employees for these problems,
which happened on my watch,’ Jobs said in a statement.‘We will now work to
resolve the remaining issues as quickly as possible.’

Goldman Sachs named

Goldman Sachs has been named as a defendant in lawsuits regarding mortgage
financier Fannie Mae’s accounting practices. The information was disclosed in a
quarterly report filed with the Securities and Exchange Commission.

The investment bank joins Fannie Mae and some of the mortgage financier’s
past and present executives and accountants – as well as other financial
services firms – facing a class action and a separate shareholder derivative
action. Goldman Sachs said the complaints allege that it violated laws,
including US securities laws, in arranging some Fannie Mae-sponsored bond deals.

The deals involved real-estate mortgage investment conduits, which are bonds
collateralised with mortgage-backed securities. In May, regulators fined Fannie
May – formally known as the Federal National Mortgage Association – $400m
(£212m), stemming from allegations that its senior management had manipulated
accounting to trigger huge bonuses.

Kodak’s snap decision

Photography giant Eastman Kodak has hired a new CFO and postponed a key
investor meeting on its future strategy. Frank Sklarsky will joinKodak on 30
October as executive vice president and will become CFO on 13 November.

He was previously CFO of ConAgra Foods Inc.and served in executiveroles at
automaker DaimlerChrysler and computer maker Dell. Sklarsky willreplace Robert
Brust, 63,who previously announcedhis intention to retire by January 2007.

Chief executive Antonio Perez said Kodak investors deserved to hearthe
financial story from the executives that will implement the strategies
discussed,rather than one who is retiring, and claimed there was ‘nothing to
hide’.