Inside Track: London’s 2014 flotations get off to a promising start
THERE have been weeks of anticipation. Now it’s time for early evaluation as the first London new issues of 2014 start trading. Which way the newly issued shares trade can set the mood for the rest of the year – or at least provide an indication of the appetite of the institutions for newly-listed stocks.
So far there’s been a bit of a mixed performance, erring on the side of positivity.
The first day trading in McColl’s, the convenience store chain, disappointed, with shares closing down at 184.5p from a 191p issue price.
But trading in shares in AO World, the online electrical retailer and Kennedy Wilson Europe, an arm of the Californian-based property group, both reported healthy gains.
The bookbuilding in Lenta closed last night, and the pricing of the GDRs was set at $10.
It will be interesting to see how shares in this group fare, given the Ukraine crisis and the pitfalls experienced by another Russian group, Tinkoff Credit Systems, which saw its shares plunge nearly 50 per cent in one day last year on fears of a change in a Russian law.
First, what of McColl’s? There’s no doubt early trading disappointed. Some investors might have been discouraged by founder James Lancaster and finance director Jonathan Miller selling £25m and £21m of their shareholdings respectively.
There was also relatively little appeal for the stock from US investors, who consistently backed some of the large new issues in the UK last year. That’s probably much to do with McColl’s being perceived as a low growth old-fashioned business. But the price dip is no disaster and should be borne by the market, especially if it stabilises over the next couple of weeks.
How different was the experience of AO World, which saw its shares rise over 40 per cent at one point during first-day conditional trading on Wednesday.
When it first considered plans to go public before christmas AO World’s valuation had been expected at around £500m rather than the £1.2bn it settled for. But the securing by Numis of three cornerstone investors who took nearly one third of the deal, together with far higher demand for the stock than was originally anticipated, enabled the value to be stretched, though maybe not as far as it could have been.
Even so, advisers priced its shares on a price to earnings ratio of 120 times, so one would hardly describe that as cheap.
Kennedy Wilson’s £1.1bn fund-raising exceeded expectations and proved there is healthy demand for a company that is banking on a revival in property prices in the UK, Spain and Ireland.
Listings on the junior market have been coming thick and fast. Yesterday DX Group raised £200m in the third largest issue on the junior market since 2007.
All told, it’s been a busy and largely successful first week of trading for London’s new issues, with institutions seemingly willing to listen to compelling stories and happy to back them selectively.