Flotation fever hits crazy heights

“Another week, another batch of share market debutantes lines up,” says Patrick Hosking in The Times. The past few weeks have seen initial public offerings (IPOs) from Poundland, Pets at Home, appliance seller AO World and online fashion retailer Boohoo.com.

Online takeaway service Just Eat, Jimmy Choo shoes and the AA roadside rescue services are next in line.

London listings so far this year have been worth around $5bn, up from $456m by this stage last year. The IPO market hasn’t been this busy since 2007. It’s been a similar story in America.

A buoyant IPO market reflects mounting confidence. Businesses have become more upbeat about the recovery in recent months, while the stock market had a very strong 2013, leaving fund managers sitting on plenty of money.

IPOs allow funds “to put big chunks of money to work in one go at what is usually considered a discounted price”, says Kylie MacLellan on Reuters.com, while strong markets tempt company owners to sell stakes.

Investors should approach such booms warily. As Ishaq Siddiqi of ETX Capital notes, private-equity firms can opportunistically use buoyant IPO markets to dump firms they have previously struggled to sell. When IPO fever coincides with heady valuations, the top of the market may not be far off.

UK listings are “being lapped up”, says Hosking. Yahoo.com points to Castlight Health, an online health information firm that floated last week at 107 times revenue – “the craziest deal since the heights of the internet bubble”.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Party's over for Putin

The only portfolio safe from Russia's rout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


19 December 1932: BBC World Service begins

The first royal Christmas message by George V gave the fledgling World Service an early boost six days after it was founded in 1932.