Foxtons lived up to its billing as one of the year’s most anticipated stock market debuts on Friday, with shares in the London estate agent rising 16 per cent on the its first day of trading.
The trading frenzy follows months of speculation about the flotation of the company that became synonymous with the easy credit and freewheeling sales tactics that precipitated the housing market crash.
The group said it had raised at least £390m from investors after its shares secured a top-of-the-range price of 230p, giving it an initial market capitalisation of at least £649m. The shares rose sharply in morning trading, hitting 285.5p before falling later in the day to close at 267p.
Investor demand reflects the positive sentiment surrounding the London property market, which has decoupled from the economic problems roiling much of the country to experience steady house price growth for the past three years.
“We bought some shares as it is a very good time to buy stocks related to property,” the head of equity at a UK institution said following the IPO. “It is a good, healthy market with share prices rising and a government underpinning the market with various policies. We think now is definitely the time to get some property stocks on the portfolio.”
An equity portfolio manager at another UK investment group added: “We thought now was the time to buy. We may sell in 15 months to take some profit because we are uncertain how far these types of stocks can go, but at the moment the market is strong and we do not think it is a bubble as it is supported by economic recovery. If the economy continues to recover, then house prices will rise and so will property stocks.”
Flotations in London this year have included Partnership Assurance, which specialises in selling pension annuities to sick retirees; Esure, the motor insurer; Countrywide, the estate agency; and the housebuilder Crest Nicholson.
The UK government also sold a £3.2bn chunk of its stake in Lloyds Banking Group this week through a placing of shares.
The autumn is set to feature fresh share issues, with the government looking to sell a majority stake in Royal Mail, and Zoopla, an online property search service, also considering an IPO.
Foxtons said up to 17m more shares could be sold through an “overallotment option”, which was brought to market by private equity investor BC Partners. The price range for the IPO had been 190p to 230p.
BC Partners bought Foxtons from its founder, Jon Hunt, near the top of the last UK housing market boom in 2007 for about £360m. The private equity investor lost control of the business to lenders as Foxtons struggled amid a seizing up of the housing market, but it regained control in 2012.
A person close to BC suggested that Foxtons’ strong stock market debut meant that it could get back as much as three times its total investment in the company.