IPOs outperform already listed stocks

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Share prices of companies undertaking initial public offerings on London’s main market have outperformed the FTSE 100, according to Deloitte.

The business advisory group’s IPO Barometer showed the share price of 10 company IPOs, brought to market between January 2011 and December 2012, rose on average by 18.4 per cent above their listing price by the end of last year, compared with the FTSE 100, which moved up just 2.2 per cent.

The findings come following a series of dismal IPOs led by Facebook’s stock market debut last May.

“There is a negative perception of IPOs and that it is better to invest in already listed stocks. Yet recent IPOs have performed 16 per cent better than the FTSE,” said John Hammond, a partner in Deloitte’s capital markets group.

“Only companies that have been realistically priced have got away [to market],” said Mr Hammond. “Getting the price right between the buy side and the sell side has been difficult in the past four to five years [post Lehman],” he said.

Unrealistic asking share prices, together with tough trading conditions have accounted for just a handful of companies coming to market in the period. “Very few companies have been able to convince investors to put in money,” he said.

Resource companies were the most appealing, with metals and energy extractors such as Polyus Gold, Polymetal and Ruspetro accounting for six of the 10 IPOs brought to market. London’s main market is now the centre for foreign resource companies seeking a flotation.

The recent findings contrasted with IPOs in 2010, when the share price of the 12 London main market entrants was, on average, nearly 40 per cent lower than the FTSE 100.

IPOs in the pipeline so far this year are expected to be across a wider range of sectors, with some technology and media companies, as well as financial services looking to come to market, according to Deloitte.

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