Appetite is growing for flotations.
TODAY marks the beginning of trading for shares in Supergroup, the fashion retailer behind the Superdry brand, following its flotation which valued the company at approximately pounds 395m.
The float of Supergroup and other companies recently such as education technology firm Promethean World would perhaps suggest that there is now a market for flotations.
Contrast today with just a few weeks ago when New Look, Travelport and Merlin Entertainments all postponed flotation plans and raised questions of whether the recent economic turbulence meant that the market had yet to develop an appetite for floats again.
However, while New Look blamed the decision to pull its float on market volatility and a loss of appetite for listings, the continuing improvement in the performance of the FTSE 100 would question this.
It may be that investors are simply developing a selective palette.
Perhaps the contrasting fortunes of the New Look and Supergroup floats indicate that investors are becoming increasingly focused on identifying future growth stories which may provide a more secure earning stream for investors.
Certainly institutional investors have questioned pre-existing levels of debt in floating companies such as New Look, and focused attention on companies with genuine growth stories, such as Supergroup, who may not be hamstrung by debt. Indeed, in advance of the private-equity backed Promethean World flotation, the company was keen to make investors aware that it was coming to market without debt and with a clear dividend policy.
A float may not be suitable for every company, but it is worth considering. The benefits of a successful flotation can be enormous, acting as a catalyst for growth, providing an opportunity to raise finance in a difficult financial climate, and increasing a company''s image and profile with potential customers and investors.
Companies with a strong record of delivering profits and growth in earnings always attract investors.
Any board embarking on the flotation trail should therefore focus on a clearly defined business plan and support from a good set of advisors from the beginning.
James Nightingale is a corporate finance associate at Watson Burton, Newcastle
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|Publication:||The Journal (Newcastle, England)|
|Date:||Mar 24, 2010|
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