As­ton Martin and Fund­ing Cir­cle en­dure shaky starts af­ter float­ing on the stock mar­ket

It looks like a case of both com­pa­nies be­ing over­val­ued

Shares - - BIG NEWS -

Two very dif­fer­ent high-pro­file IPOs (ini­tial pub­lic of­fer­ings) in Lon­don have ex­pe­ri­enced sim­i­lar teething prob­lems af­ter mak­ing their stock mar­ket de­buts. Peer-to-peer (P2P) plat­form Fund­ing Cir­cle (FCH) saw nearly of a fifth of its value wiped off in con­di­tional trad­ing on 2 Oc­to­ber.

‘This is highly un­usual, as typ­i­cally the banks which bring a com­pany to mar­ket are able to at least sta­bilise a share price dur­ing this pe­riod,’ says AJ Bell in­vest­ment di­rec­tor Russ Mould.

The shares re­mained un­der pres­sure on 3 Oc­to­ber as un­con­di­tional trad­ing got un­der­way, down a fur­ther 2.7% at 360p.

Lux­ury car man­u­fac­turer As­ton Martin (AML) fell 4.7% to £18.12 on its mar­ket de­but (3 Oct).

Both com­pa­nies saw their is­sue prices come in at the lower end of the guided range, in Fund­ing Cir­cle’s case at 440p. WHY ARE THEY STRUG­GLING?

The mar­ket re­ac­tion sug­gests there are se­ri­ous con­cerns over the val­u­a­tion of both com­pa­nies. Fund­ing Cir­cle gen­er­ated rev­enue of £94.5m in 2017 and chalked up a pre-tax loss of £36.3m, in­cur­ring heavy mar­ket­ing costs of £38.7m.

With mar­ket­ing costs ex­pected to rise and a tar­nished rep­u­ta­tion for the P2P sec­tor, it is per­haps lit­tle sur­prise in­vestors are giv­ing Fund­ing Cir­cle the cold shoul­der.

As­ton Martin made a profit last year and does have a strong brand, syn­ony­mous with the James Bond films, but it has en­dured seven bank­rupt­cies since its in­cep­tion in 1913 and even at cur­rent lev­els trades at a sig­nif­i­cant pre­mium to Ital­ian sports car gi­ant Fer­rari.

At the cur­rent mar­ket cap of £4.13bn and us­ing last year’s net profit fig­ure of £77m the shares are on a trail­ing price-to-earn­ings mul­ti­ple of 53.6 times com­pared with Fer­rari at just over 40 times.

A look at the per­for­mance of other IPOs in 2018 show the right sto­ries are still at­tract­ing in­ter­est from in­vestors. For ex­am­ple JTC (JTC), a provider of ser­vices to as­set man­agers, has in­creased by 34.5% in value since March, while mi­cro­fi­nance spe­cial­ist ASA In­ter­na­tional (ASAI) has also done very well. (TS)

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