LONDON Two European companies cancelled plans to IPO on Tuesday due to unfavourable conditions, joining a growing number of firms to cancel listings this year amid disappointing debuts for many that did brave choppy markets.
The withdrawals by UK gym operator Pure Gym and German real estate company OfficeFirst are a setback for bankers who had hoped a market window was finally looming, allowing them to revive deals postponed earlier this year due to uncertainty over China's growth, the oil price and Britain's Brexit vote.
Tuesday's cancellations in London and Frankfurt respectively come just weeks after Telefonica (TEF.MC) pulled its plan to float its infrastructure unit Telxius due to insufficient investor appetite.
"Given the challenging IPO market conditions, the Board has decided not to proceed with a listing despite the strong interest shown by potential investors", Pure Gym's chief executive Humphrey Cobbold said.
Britain's blue chip FTSE 100 index hit a record intraday high on Tuesday following sterling's recent plunge, but bankers expect smaller, UK-focused companies to be exposed to a possible downturn of the British economy following the Brexit vote.
This could explain why investors are cautious about buying into UK-focused companies like Pure Gym, which had announced its plan to float just last month and hired Jefferies and J.P. Morgan (JPM.N) as global coordinators, Credit Suisse as joint book runner and Rothschild as financial adviser.
"PRICE SENSITIVE" INVESTORS
The German unit of IVG Immobilien AG, OfficeFirst, said two weeks ago it was planning to sell shares worth up to 880 million euros in mid-October. However its chief executive Michiel Jaski said on Tuesday investors were not prepared to pay the price of 21-23 euros it was asking for shares.
The fall in the price of its peer Alstria (AOXG.DE) during marketing of OfficeFirst's IPO in recent weeks may have spooked investors.
"The IPO market is open but not indiscriminate, Craig Coben, Head of Global Equity Capital markets at Bank of America Merrill Lynch (BAC.N) told Reuters.
"Investors are more price sensitive than normal especially after a couple of bellwethers performed poorly after flotation. These IPOs chastened investors."
Driving bankers' hopes of an upturn was Denmark-based payment services provider DNets (NETS.CO) which made its market debut last month. Demand for its shares exceeded expectations but the firm is now trading below its offer price.
Shares in Innogy (IGY.DE), the green energy business of struggling power group RWE (RWEG.DE), fell below their issue price in its debut on October 7, but recovered later in the month.
Last week British energy supplier First Utility postponed plans to list shares due to uncertainty created by Brexit and because proposals to improve competition in the energy market have not yet borne fruit. The company also said it was in no hurry to raise cash.
Money raised from initial public offerings (IPOs) fell by more than a third to $79.2 billion in the first three quarters of this year, the slowest such period since 2009, Thomson Reuters data showed.
UK-based software company Misys, medical device maker ConvaTec and Telefonica's UK mobile operator O2 are among the largest European IPOs expected in the coming few months. But Telefonica, which was initially aiming for a December listing for O2, is now considering to postpone the deal to next year, sources told Reuters.
J.P. Morgan topped the league tables for both equity offerings and public listings globally according to TR data.
(Editing by Alexandra Hudson)