The Facebook debacle deserves a reaction from London
THE controversies surrounding the historic $104bn flotation of Facebook in the US should have reminded all of us that although the New York financial markets may currently be the place to go for technology flotations, they are not infallible.
What is disappointing is that with so much wrangling about how the float was handled, very few people are putting the case for London to somehow take advantage.
When commentators refer to the problems of Nasdaq, which closed down for around 30 minutes at a crucial time in the proceedings, they talk about Facebook maybe moving on to the New York Stock Exchange. There’s no-one cheeky enough to say it should consider listing on the London Stock Exchange, not even the uber-optimistic Mayor of London, Boris Johnson.
There are many reasons for this. New York is firmly established as the place to go for technology listings. It has the research base and the investor appetite, as well as the recent history, with LinkedIn, Groupon et al recently floating there.
London, alas, has had its own valuation issues, with investing institutions thoroughly fed up by what they view as companies overpricing themselves as they come to the market.
Mention the likes of Ocado, Betfair or Perform and those names won’t produce much of a smile from UK institutional shareholders.
But surely now is the time to look at whether we can do something to be more competitive in the tech space area. “London needs to be more issuer friendly,” says a technology banker at a large investment bank. “It’s a less flexible market, with less scope to change pricing late on, for example,” he added.
While companies the size of Facebook look unlikely to rethink New York for the time being, there are a clutch of smaller tech firms that might be tempted to try here.
“We have a clutch of high quality London based companies, including Mind Candy and JustEat, that are at or approaching the point when they could float here… I’m hopeful that a few success stories will help open the markets more widely,” says Nic Brisbourne, a partner at DFJ Esprit, whose recent investments include LoveFilm and The Cloud.
“Post the Facebook debacle, it will be easier for London to show it is the best place for those companies to list.”
BLOCK TRADES
While IPOs continue to struggle on the London markets, there doesn’t seem to be any shortage of buyers for stock in good quality companies.
When the Reimann family wanted to sell a five per cent stake in Reckitt Benckiser it hired Bank of America Merrill Lynch to do the business, in what was to be the largest accelerated placing of shares in EMEA in 2012.
The deal, done at a 6.1 per cent discount to the market price, moved Merrill up to second place in the equity capital markets tables. david.hellier@cityam.com