Lack of confidence hits IPOs

There are few signs of confidence in a market reeling from the disappointing performance of HMV Media’s shares after its IPO and uncertainty around the off-on Punch Taverns flotation.

With other IPOs scheduled for this summer, there still appears to be little appetite from the share buying public.

At the beginning of the year, corporate financiers were predicting a return of confidence by the summer, but now they are hoping for a good Christmas.

Howard Leigh, chairman of the ICAEW’s corporate finance faculty and director of Cavendish Corporate Finance, predicts the turmoil in the IPO market will prevent smaller companies floating on the stock markets.

‘It will be difficult for smaller deals if bigger deals are a problem,’ he said.

But Leigh believes that a weak IPO market could help boost the level of mergers and acquisitions.

Leigh’s team has completed four deals in the past three weeks, including the sale of Locum, a healthcare recruitment specialist.

But he does not see an immediate upturn in the market: ‘Our pipeline is full, but closing deals is taking a bit of time,’ he said.

Last Thursday Punch Taverns, Britain’s biggest pub owner, pulled its planned flotation on the London Stock Exchange only to announce it was on again, but at a discounted price.

This followed the dismal performance of HMV’s share price after it floated.

The music and book retailer, led by finance director Neil Bright and chief executive Alan Giles (pictured with chief operating officer Brian McLaughlin), saw its share price fall 9% from its 192p issue price.

Now doubts hang over bookmaker William Hill, DIY retailer Focus Wickes and luxury goods retailer Burberry, all of whom are planning IPOs for this summer.

Guy Warrington, KPMG’s new head of corporate finance, admits conditions are not easy. ‘It’s not the greatest of markets,’ he said. ‘We have had a number of inquiries but people are being very careful.’

Like Leigh, he does not see an upturn in the market until the fourth quarter of the year.

But he believes there are opportunities in the marketplace. ‘Shrewd investors will lead the market,’ he said, but added the lack of retail investors could hamper a recovery in IPOs.

According to Graeme Pike, head of corporate finance at PricewaterhouseCoopers, there is an air of realism in the marketplace.

Speaking before the Punch IPO was pulled, Pike said: ‘We are looking at a pick up in the fourth quarter (of this year) … people are more bearish in their timing.’

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