Lacklustre stock markets halt autumn floats

• New Look among firms which cancelled plans for an IPO
• Ocado shares have dropped 21% since flotation

An array of rumoured flotations that were delayed during the financial crisis but tipped for revival this autumn have been shelved again on fears about the state of the capital markets.

The series of U-turns comes after the woeful performance of online retailer Ocado, which employed eight investment banks to get its flotation away in July, and the school whiteboard maker Promethean World. Shares in the two firms have slumped by 21% and 38% respectively. The nervousness also follows research by analysts Dealogic which found that more than half Europe's major floats during 2010 are trading below their issue price – also removing a potential exit route for many embattled private equity funds.

Goldman Sachs, the banker to Betfair and Virgin Active, has been talking up the prospects of both businesses floating this autumn, but advisers to the gym operator confirmed there was little chance of it seeking a listing this year.

Sources close to Betfair suggested market conditions might also scupper the online betting exchange floating this autumn – a much-heralded £1.5bn float that would also be complicated by the fact that it would probably crystallise large losses for Softbank, the Japanese investor which has a 23% stake in the gambling business.

New Look, the retailer owned by private equity group Apax which pulled plans for an IPO earlier this year, is another that will not attempt to list until 2011 at the earliest. One source with knowledge of the retailer's plans said: "I don't think analysts are expecting a New Look float this year. Markets can turn but the business will not want to float before the run-up to its most important trading period, Christmas."

Another Apax-owned business, the bureau de change group Travelex, was also reportedly considering tapping the equity markets this year, but it too plays down becoming a public company during 2010. Meanwhile, Blackstone-owned travel reservations company Travelport, which cancelled its £1.8bn flotation in February, said last month it had "no compunction to list".

Jeremy Batstone-Carr, director of research at stockbrokers Charles Stanley, said: "I certainly do not expect a lot of IPOs this autumn. Private equity companies that were looking at floating investments are now just swapping businesses with each other. … Senior executives tend to be better able to see medium term trends than their financial analyst counterparts and the fact is that many companies are sitting on cash piles which suggests low confidence. The bottom line with all the recent M&A activity is that it is really being driven by companies looking to shore up their top line in an environment where top lines are under pressure."

Equity analysts will also be watching closely for worsening economic news that could further undermine any remaining flotation plans over the next few weeks. "US third quarter GDP numbers are set to be announced later this month. That number could conceivably be negative, which would set the cat amongst the pigeons," said one.


Simon Goodley

The GuardianTramp

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