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4-Traders Homepage  >  Equities  >  Euronext Paris  >  Amundi    AMUN   FR0004125920

AMUNDI (AMUN)
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CDT AGRI ASS MGMNT : Investors, bankers wrestle for stock listing pricing power

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11/11/2015 | 04:25pm CEST

Companies planning stock market listings before next year are having to lower their expectations or postpone their flotations as the power to determine the price on initial public offerings has shifted from issuers to investors.

Some European IPOs, such as Spanish airport operator AENA and UK car classifieds website Auto Trader, secured valuations at or near the top of their respective ranges in the first half of 2015, but appetite has since waned.

Investors have ploughed $59.2 billion into European IPOs this year, compared with $62.8 billion (41.3 billion pound) this time last year, Thomson Reuters data shows. But firms hoping to list before 2016 face a tough task to tempt fund managers with new issues that could make or break their annual performance figures.

"It is late cycle, a lot of companies have come to market and a lot of money has been put to work with IPOs. It has moved the pricing power away from vendors to the buyers," said Greg Bennett, head of capital markets EMEA and Americas at Fidelity International.

A number of IPOs that tried to launch in recent weeks, including digital security company Oberthur Technologies, music streaming site Deezer, building materials group Xella and most recently food delivery company HelloFresh, have had to put their plans on hold.

Some of the larger deals such as payments company Worldpay and Poste Italiane have fared well, but others, including autoparts supplier Schaeffler and Bayer subsidiary Covestro had to temper their cash-raising ambitions in order to get their listings over the line.

Asset manager Amundi narrowed the price range of its IPO to the lower end of the band originally set, indicating that most orders came in at the bottom.

Dutch bank ABN Amro, meanwhile, announced on Tuesday an indicative price range for its listing that values the company between 15 billion euros ($16.1 billion) and 18.8 billion euros ($20.2 billion), with the bottom of the range giving the company a valuation below its book value.

"We have had a few poor deals, so there's a degree of deal fatigue," said Barrington Pitt Miller, equity analyst at Janus Capital.

"If a banker is pitching a large deal with follow-on tranches, they have to be willing to price accordingly and with a view to building a strong aftermarket. The problem is, that doesn't always happen," he said.

VOLATILITY

The volatility that hit global equity markets in late August and late September following fears of a slowdown in China has now subsided but has left scars that continue to impact the equity markets and are making investors more demanding.

"Whilst volatility has reduced, confidence levels aren't sky high and people are still waiting to see what the Fed is going to do around interest rates. There are a lot of things on the horizon that could unsettle investors," said Tom Johnson co-head of EMEA equity capital markets(ECM) at Barclays.

The IPO markets were similarly rocked in September and October last year, as market turbulence spooked investors. But while on that occasion the Eurostoxx 50 lost around 400 points before it rallied, this year the figure was closer to 600.

The investor base has also shrunk as some funds are not looking to invest near the end of the year.

"Hedge fund performance has been mixed over the course of the year and they are often key marginal buyers in IPOs," said Craig Coben, global co-head of ECM at Bank of America Merrill Lynch, who added that it had also been a middling year for many institutional investors.

The gulf between the price investors are demanding and companies are expecting could push the latter to consider alternatives to market listings.

"A lot of IPOs have been completed and gone well, which will encourage issuers for 2016. That said, valuations have been tighter in the second half of the year which could see more vendors revisiting alternatives like a trade sale or a private equity bid," said Johnson.

It is still unclear how the market will react to the listings being prepared for next year, said Bennett at Fidelity, but some of the companies that still plan to list in 2015 will have to either postpone their deals or change their plans.

"I don't think all of them are going to make it over the line," he said.

Vendor's price expectations need to descend to come in line with what investors are willing to pay, said Bennett, but other factors could also help reinvigorate the IPO market.

There are a number of capital raises expected in the coming weeks and months, especially in the financials sector, including that of Credit Suisse and several Greek banks, which will compete with IPOs for the attention of investors.

"These fund raisings are never small so do take liquidity from IPO market," said Bennett. "Once those end it could free up funds for IPOs."

(Reporting by Emiliano Mellino; Additional reporting by Sinead Cruise and Simon Jessop; Editing by Giles Elgood)

By Emiliano Mellino

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EBIT 2017 1 037 M
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EV / Sales 2018 4,38x
Capitalization 14 160 M
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