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Categorized | Equities

European IPOs test risk appetite

Posted on October 27, 2015

Mailboxes and a mailbag are seen in front of the headquaters of Poste Italiane in downtown Milan, Italy©Reuters

British share registrar Equiniti’s share price fell about 8.5 per cent in the first day of trading on the London stock market after pricing at the bottom of its range in its initial public offering.

The company, which was previously owned by Lloyds TSB and is now backed by the private equity firm Advent, was priced at £1.65 a share but by the close of trading had fallen to £1.51 — the latest example of what has been a difficult few months for initial public offerings.

Volatility in equity markets initially sparked in late summer by concerns about China’s slowing growth rate and expectations that the Federal Reserve would raise interest rates in September, has put a damper on flotations as investors shy away from taking on any additional risk.

Dutch government to float ABN Amro

State to recoup some of the €22bn it ploughed into bailed-out lender

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IPOs have been pulled or repriced across Europe and the US.
First Data, the largest deal in the US this year, priced $2 below its initial range, and fell on the first day of trading, while Digicel, a Caribbean telecoms group, and Albertson, a grocer, pulled their planned flotations in the US.

In Europe, Xella of Germany and Shield Therapeutics, a Newcastle-based pharmaceuticals group, also deferred their IPOs, while Hastings, a motor insurer that floated at the beginning of this month, is trading below its IPO price.

Poste Italiane, the Italian post office and bank that priced last week and began trading on Tuesday, barely moved, with its share price falling 0.5 per cent after the start of trading. The company priced at €8.8bn, which was below the figure of €10bn reported in the Italian press as a potential valuation of the company, although a market participant dismissed that valuation as “aspirational”.

    While initial shareholders got no return on the first day of trading, the fact that Poste Italiane’s share price did not jump avoided the political controversy that surrounded the privatisation of Britain’s Royal Mail. The UK government was widely criticised for undervaluing the company, which rose substantially on the first day of trading.

    “The [Poste Italiane] deal has gone very well, as you can imagine the deal was launched in a volatile environment,” said Claudio Villa, an equity capital markets banker at Citigroup who worked on the offer.

    “There is a degree of IPO fatigue out there but we haven’t seen it with this transaction,” he said.

    Elsewhere, the Dutch government announced on Tuesday that it would sell its stake in ABN Amro before the end of the year in an attempt to recover some of the €22bn that it spent bailing the bank out during the financial crisis.

    In a letter to the Dutch House of Representatives, finance minister Jeroen Dijsselbloem said NL Financial Investments, the body in charge of the bank, had said the three conditions necessary for an IPO had been met.

    “The financial sector is sufficiently stable for a sale, there is sufficient interest from the market and ABN Amro is ready for a sale,” he said.

    This article has been amended to correct an earlier statement that Covestro, the spin-off of Bayer’s material science group, is trading below its IPO price.