Condolences for Card Factory as market cools for UK new issues

Reuters - UK Focus

By Freya Berry

LONDON, May 16 (Reuters) - Lukewarm demand for shares inBritish greetings card retailer Card Factory Plc isthe latest indicator that interest in European companyflotations may be cooling somewhat after a red-hot start to theyear.

Having seen the busiest period for initial share offerings(IPOs) since before the financial crisis of 2008-2009, investorsmay be getting more choosy about the stocks they buy into,forcing a number of companies to withdraw listing plans or scaleback the price they are looking for.

With a number of high-profile offerings in the works,ranging from banking group TSB to shoemaker JimmyChoo, companies looking to raise capital - and theadvisers helping them do so - will be hoping any setback istemporary and stock specific, not a broad-brush aversion.

"I think IPO investors have become a bit more fickle," onebanker who works on flotations said. "Markets are at all-timehighs. Sentiment towards IPOs? Probably not."

Card Factory shares have fallen over 11 percent below theirissue price since their London stock market debut this week. Thecompany, owned by private equity firm Charterhouse - and whoseflotation was managed by Morgan Stanley (Berlin: DWD.BE - news) , UBS (Xetra: UB0BL6 - news) ,Nomura, Investec (LSE: INVP.L - news) and STJ Advisors - wastrading at 199.25 pence by 1421 GMT in conditional dealing.

They had been priced at 225 pence on Thursday, already atthe bottom of a previously set price range.

Conditional dealing allows banks and brokerages to tradeshares between themselves and stabilize the price of an IPObefore the stock is issued to the public markets.

Card Factory's decline is seen by bankers as a negativesince companies target an uptick on their debut, to rewardinvestors who risked their money by buying into the offering,while not underpricing the stock.

A rise of 5 to 10 percent is seen as ideal by manyinvestment bankers.

STRONG MARKETS

For companies like Card Factory, flotations have become moreviable this year because Europe's IPO market has experienced asurge in activity.

London has been a particular hot spot as firms seek outcapital from yield-hungry investors, and private equity groupscash in on strong equity markets to exit investments made beforethe crisis.

UK-based retailers Poundland, Boohoo andPatisserie Valerie have all floated in recent weeks.

Proceeds from European IPOs have risen 248 percent in theyear so far against the same period last year to $24.9 billion,the strongest level since 2007, Thomson Reuters (Frankfurt: TOC.F - news) data showed thisweek. The UK has seized the lion's share, with $7.4 billionraised in 30 listings.

Yet there are signs that investor appetite may be waning.

Last week Dutch-based Domus, which holds properties in theCzech Republic, withdrew its planned Amsterdam flotation, citingmarket and geopolitical conditions.

Israeli digital advertiser firm Matomy, which scrapped itsIPO in April after it could not meet UK listing requirementsthat 25 percent of shares be held by European investors.

Some said that rather than being a general withdrawal fromthe market, investors were simply being more selective.

Bankers also say the pipeline of prospective new issuesremains strong, with the bigger players saying they have between10 and 20 European listings lined up before the summer holidays,when the market traditionally quietens.

Major names including over-50s holidays-to-insurance firmSaga as well as TSB are seeking to float in comingmonths and could prove popular.

Elsewhere Europe's largest online fashion retailer Zalandois eyeing a possible listing in the third quarter, while outsideEurope China's Alibaba recently published aprospectus for what could be the largest technology debut inhistory.

"The observation from the trading floor is one based onquality," said Marc Kimsey, senior trader at brokerage AccendoMarkets. "We are experiencing an overwhelming response to legacybrands such Saga and TSB." (Editing by David Holmes)

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