Two new floats sink in choppy IPO waters

published 10 November 2017

In the third quarter, London was the busiest major stockmarket for initial public offerings (IPOs). But this quarter IPOs have hit troubled waters. Last week two flotations worth a joint $6bn were cancelled. Radio and mobile-phone mast company Arqiva, which had hoped to raise £4.5bn, and Bakkavor, a supplier of fresh foods to supermarkets and sandwich shops, both blamed market uncertainty. Meanwhile, EN+, Russian oligarch Oleg Deripaska's energy and metals conglomerate, priced its flotation at the lower end of the expected range.

Arqiva and Bakkavor "really deserve some kind of medal for limp excuses", says Jeremy Warner in The Sunday Telegraph. Citing market uncertainty at a time when share prices have been hitting new record highs for months is like being a clothing retailer blaming a poor summer season on too much sunshine. It's not hard to see what's really going on here: the flotations' sponsors were just being "too greedy".

Arqiva, which is highly indebted, had just failed to secure a private sale, notes Jim Armitage in the Evening Standard, which means equity investors were being asked to buy something nobody else wanted hardly an especially appealing proposition. Bakkavor, meanwhile, is in a fiercely competitive market and run by two of the "tarnished generation of Icelanders" who almost bankrupted the country. The IPOs failed because "fund managers were being choosy with our pensions".

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Yet there's a price for everything as the EN+ IPO shows, says Warner. "Set it low enough and the investors will come, even for someone with as colourful a reputation as Deripaska".