Pandora IPO lifts lid on PE failings

John Bakie
03 August 2011

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Pandora is not the only private equity-backed IPO to suffer т it would seem the box is full of underperforming listings. John Bakie reports.

Last year's €3.6bn listing of Danish jewellery maker Pandora was seen as a major sign that the listing market had improved. Today however, following a cut in the company's earnings outlook, shares are down further and now stand 86% below their peak. Recently the poster-child for PE, Axcel-backed Pandora is now one of the worst-performing private equity IPOs in recent years.

Unfortunately, it is not the first time private equity IPOs have not gone to plan.

Early last year, Apax listed interactive whiteboard provider Promethean World to much fanfare, listing shares at 200p and boasting a 2.5x return. However, with Britain's new government making tough budget cuts, the firm soon found itself with little demand for its products from schools, a key part of its customer base. The firm's shares had slipped 40% when The Telegraph branded it the "worst performing IPO of the year", and today sit at just 61.5p.

Timing isn't everything
Simple bad timing and poor performance are not the only concerns for companies being listed; they must also consider how public ownership can affect growth strategies. Unquote's parent, Incisive Media, was owned by August Equity (then Kleinwort) before Incisive's London listing. The business' acquisitive growth strategy was not well suited to the short-term nature of public markets, and so went private again in an Apax-backed buyout.

The growth Incisive underwent meant it was a larger buyout house the second time round, but this is not always the case: sometimes the same buyout firm takes private precisely the company it floated previously. In 2008, for example, Nordic GP Altor delisted AGR Group, an oil services firm it had exited via a flotation just two years earlier. However subsequent poor performance made it attractive for private equity, and none better than the previous owner, given its intimate knowledge of the business. Sometimes a bad listing isn't all bad news for the private equity investor.

Across the pond, some recent private equity flotations could be ripe for take-privates already. One such example could be Fortegra Financial. The Florida-based business IPOed a week before Christmas and enjoyed a steady share price until this April, when a gentle slide gave way to a steep fall, with shares now trading a third below their issue price of $11 (itself a third below the initial target of $15-16). Sources close to the deal have indicated Fortegra's listed company status could be short lived, as its undervalued share price makes it attractive to private equity once more.