Failure of Next Capital to complete initial public offer of hire company tipped to give over-exuberant market a shake-up.
Investor fatigue claimed its first victim yesterday when Australian private equity firm Next Capital withdrew its initial public offer (IPO) for the equipment hire company Hirepool after local institutions baulked at the asking price as the offer neared its final hurdle.
Next Capital's decision to take the offer off the table came after institutions had exerted downward pressure on the $1.10 to $1.50 indicative price range.
One financial market source said three or four retail brokers and about three-quarters of the local institutional market staged a "virtual boycott" of the issue, which they had priced at about 70c to 85c a share. Failure to get the offer away had given an over-exuberant market a shake-up, he said.
"It's injected an air of reality back into the market."
Serko's poor debut on the market yesterday, plus the decline in Xero's share price, was evidence of the market becoming more circumspect about valuations, the source said.
Yesterday's withdrawal of Hirepool stunned the market as the indicative price range is usually arrived at during "soft sound" interchanges between the vendors and institutions before the pricing guide is formulated.
"I was surprised to hear that local institutions walked away from it, so it can only be that they had second thoughts," said JBWere New Zealand equity manager Rickey Ward. "And that would not be surprising given the flood of IPOs that are coming to the market."
The local market has a handful of new issues that have been officially set in train or are on the drawing board. In Australia, the IPO market is running hot, with up to 20 new issues either confirmed or pending.
The raft of IPOs follow the Government's partial sales of Mighty River Power, Meridian and Genesis, and several other smaller issues, which have sucked billions of investment dollars out of the market.
A strong sharemarket has encouraged several companies to raise capital and to seek a listing on the stock exchange.
Software business Gentrack will list on the NZX and ASX today, while satellite technology company ikeGPS expects to list on July 23. Christchurch-based apple grower and agribusiness company Scales Corp expects to list on the NZX on July 25. Another private equity selldown, Metro Glass, is expected to hit the market soon.
Listings have been tipped this year for technology firms including Orion Health, Vista Entertainment Solutions, Eroad, TripleJump and CricHQ. For the remaining issues, fund managers said yesterday's experience would put a sharper focus on the pricing.
NZX chief executive Tim Bennett, speaking at yesterday's debut on the NZX of software company Serko, said the withdrawal of the Hirepool offer provided a "check on valuations" for companies coming to market.
"This is the way the market works," he said. "It's not a reflection on the market, but a reflection on that particular company and what those shareholders wanted."