News Column

Housing investment firm drops listing amid signs of float fatigue

August 6, 2014

Julia Kollewe Josephine Moulds

An investment company that funds the development of new homes ditched its plans to float on the London stock exchange yesterday amid signs that the appetite for new listings may be fading.

Urban Exposure was hoping to raise pounds 500m to fund the construction of homes in London and the south-east.

The company said it had received an encouraging response from prospective investors, but added that it was concerned about the "prevailing IPO [initial public offering] backdrop".

After a lull that lasted several years after the financial crisis, there were more flotations in the first half of this year than in the boom times of 2007. Forty companies raised pounds 5.7bn from the start of the year until early June, according to data from Thomson Reuters. It outstrips the previous pounds 4.9bn record for the same period, set in 2007.

There are growing signs that float fatigue has set in after several market debutants tumbled in value. Shares in Pets at Home have dropped 25% since it floated in March. Shares in AO World, the domestic appliance website, have lost 31% since its float in February, while shares in the fast-growing fashion website Boohoo have dropped 22% since their March listing.

Both AO World and Boohoo rocketed on their market debuts, triggering fears that the stock market was once again gripped by dotcom fever following the high-profile IPOs of Twitter and King Digital Entertainment in the US. This led to a sell-off in technology stocks around the world in April which dragged down stock markets.

In May clothing chain Fat Face became one of the first companies to pull its planned London listing, in which it hoped to raise pounds 110m, citing difficult stock market conditions. When the property management firm Clipstone cancelled plans for a pounds 140m float last week it blamed the summer slowdown. Last month the student accommodation fund manager Brandeaux decided against listing its troubled fund Liberty Living in what would have been a pounds 400m launch. Hungarian budget carrier Wizz Air has also cancelled plans for an IPO.

Even so London's blue chip index, the FTSE 100, has come close to reaching a record high several times this year.

However, along with other stock markets, the FTSE has fallen back over the past week, knocked by concerns over early interest rate rises on both sides of the Atlantic and mounting geopolitical fears. It has fallen into negative territory for the year, and closed at 6682.40, up nearly five points, yesterday. The Dow Jones industrial average suffered a fall of more than 300 points last Thursday, its worst daily performance since February, which wiped out all the gains made so far this year - a fortnight after hitting a record high.

Shares in Pets at Home have fallen by 25% since its March float, making it one of several debutants to have tumbled in value

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Source: Guardian (UK)

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