Exits: Private equity IPO prices fall

John Bakie
25 August 2010

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With a number of high-profile exits so far this year, selling companies has been a hot topic, particularly after the many difficulties of 2009. However, the IPO market has been difficult for private equity players, and new figures show just how tough some listings have been.

Figures from unquote" Research's latest IPO Tracker show a number of this year's listings have seen share prices tumble on public markets. Furthermore, there is little correlation between specific markets and the success of an IPO, with markets across Europe seeing both winners and losers. However, UK markets have performed particularly badly.

The worst performing private equity-backed IPOs took place in the UK, and have seen their share prices fall by up to almost 40% since listing. Cambria Automobiles Holdings floated on London's AIM in April this year for £50m, with a 50p per share list price. However, today that share price has fallen to just 41p, an 18% fall. Promethian Technologies Group, which also listed on AIM this year, has seen its share price fall 39.6% since March 2010.

Even the top end of London's public markets have been troublesome for private equity-backed companies. The high profile flotation of delivery firm Ocado, which initially aimed to list for over £1bn but was forced to reduce the valuation amid low appetite from institutional investors, has also suffered. Ocado listed at 170p last month, having originally set a 200-275p price range (later reduced to 180-200p). The disappointing listing has been followed by further price falls, with shares now trading almost 18% below their listing price at 139.9p.

Of course, the UK is not the only market to see falling share prices. Netherlands-based Phillips Semiconductors has seen its share price fall 23%. Furthermore, Sweden's ScandBook AB was the worst performer, seeing its share price tumble almost 64% since listing in March.

It would seem institutional investors are not yet ready to put significant money into publicly listed equities. Many bought into major IPOs prior to the financial crisis, and will still be feeling the pain caused by the rapid fall in stock markets seen in late 2008 and early 2009. With economists again predicting a "double-dip" recession, greater certainty in the economic recovery will be needed to convince public market investors.