Gregarious lot, investment bankers. When a company is planning a flotation it often starts off with just one lonely advisory bank. But it is never long before a whole lot more turn up, brandishing ring binders and wanting to know where the party is. By the end of the process there may be 15 on the share distribution team, all with fancy titles such as “sub co-bookrunner, Emea” and “pan-galactic gargle blaster”.
More is definitely not merrier in the view of big investors, such as would-be reformer Legal & General Investment Management, particularly when new issues perform poorly. Examples cited by institutions with the regularity of an estranged wife reminding her husband of his infidelities are tech group Promethean World (-90 per cent), miner Bumi (-70 per cent) store chain Debenhams (-50 per cent) and online retailer Ocado (-40 per cent).
LGIM has presented a wish list of correctives to the UK Listings Authority. The size of syndicates should be limited, it says, to improve accountability and increase the availability of independent research. Fees should be deferred and proportionate to share price performance over a fixed period after an initial public offering. And the performance of each sponsor’s previous IPOs should be published in new issue paperwork.
There is justice in these proposals, but only the rough kind. Some deals have lengthy syndicates simply to boost banks’ league table rankings. But some big transactions just need lots of banks to snuffle out pockets of demand. Deferred fees could penalise or reward banks for market shifts over which they have no control. Making them wear IPO performance as a badge of pride or shame is subject to the same objection.
The UKLA is unlikely to adopt the proposals. But that is scarcely LGIM’s aim. Instead it hopes to turn a muddled private debate into a coherent public one. A code of conduct would be one useful result.
Some on the sell side would prefer to sit on their hands, hoping rising markets will flip the balance of power back in their favour. But engaging with investors would not just be good City citizenship. With a lengthening pipeline of new issues to get away, it would be good business.
His eyes on the pies
Pubs and pasties go well together, as countless Brits know to the detriment of their waistlines, writes Alison Smith. Certainly they have been a good mix for Roger Whiteside. The chief executive of debt-laden Punch Taverns is moving seamlessly to run Greggs, where he has been a non-executive for almost five years.
No wonder boards are sometimes reluctant to let executive directors take up non-executive roles at other companies. These broaden the executive’s experience, but they can also act as an extended and low-risk audition.
Mr Whiteside’s move is particularly striking because he was a member of the Greggs’ nomination committee until he very properly removed himself once he figured as a strong candidate. Imagine how awkward the next committee meeting would have been had the job gone elsewhere.
Not as awkward, you might think, as it is for Punch. But the pub company insists that Mr Whiteside’s focus was the operational turnround the pubs require. Stephen Billingham, the (newly executive) chairman, and Steve Dando, finance director, will continue to lead talks with the 16 categories of bondholders and other assorted parties to seek a sounder financial footing for the group. At least there is plenty to keep everyone busy.
Though Greggs’ net cash of £1.8m at the half-year point cannot match Punch’s £2.4bn of net debt for a financial challenge, the operational task is still exacting. Over Christmas, Greggs’ underlying sales dropped 3 per cent (albeit against a strong comparative) and it is reining back store openings to spend more on refurbishments. But all the refitting in the world will not sell sausage rolls when the stores are in the wrong place: too many Greggs stores are on the high street, whose death is reported on a regular basis. Mr Whiteside’s experience in running a disposal programme at Punch may come in handy.
An economic consultancy has calculated the public cost of a £50bn new UK hub airport at a prohibitive £10bn-£30bn. Meanwhile, the Turkish government has announced plans for a six-runway hub of its own, costing just $5bn (to start with).
A colleague suggests a solution of blinding simplicity to make the “Boris Island” airport project feasible after all. Build it in Turkey. The price tag would be affordable and the weather would be a lot nicer than you’ll ever get in the Thames estuary.