Flotation market gets jittery with all the equities’ good news

Comment Martin Flanagan

It is counter-intuitive. The FTSE 100 is at a record high, the FTSE 250 is at a record high. Everthing looks hunky-dory in the stock market garden. So why are companies queuing up to pull flotations?

Two big London floats were ditched – at least temporarily – yesterday, one which would have been the year’s biggest initial public offering (IPO).

Mobile mast maker Arqiva and food producer Bakkavor blamed market “volatility” and “uncertainty” for their 11th-hour cold feet on public listings. Personally, I have some difficulty with equities bubbling around at record or near-record highs being construed as difficult market conditions.

I know there have been some macro political and economic issues like Trump, North Korea and Brexit, but these were all well-known when these companies considered and decided on flotations.

The Arquiva and Bakkavor IPOS would have valued the businesses at £6 billion and £1.5bn respectively, so hardly small fry here, and with a phalanx of top-drawer financial advisors in the wings.

In addition to those companies, the business services provider TMF Group scrubbed an IPO last month, instead opting for a sale to a private equity firm.

Questions are also being asked about whether the float of EN+, the Russian aluminium conglomerate, will be a success, with its planned market valuation cut yesterday to $14 a share, at the bottom end of the range.

Talking to some senior City contacts yesterday, it emerged that there may be no one reason the IPO season has hit a bumpy road.

Some fund managers are apparently just being more selective. Company earnings are good, and the economic backcloth post-brexit is far from brilliant but not a feared nightmare, either. The fund managers can afford to be choosy.

Equally, I’m told some businesses may be trying to ride the record equities wave by trying to get away floats at unrealistic prices. Naughty, but human nature.

I was also told that Arquiva was coming out of private equity with plenty of debt on its balance sheet, not the archetypal dream ticket as far as professional investors are concerned.

It is not an IPO market in crisis, but it has hit the buffers temporarily.