Banks under fire for new-listings debacle
Investors in new stock market listings run by Merrill Lynch have lost a staggering £1.6bn this year, figures show today.
The bank has seen the value of firms listed since January tumble 13.1%, with Sports Direct the most high-profile disaster, losing more than half of its value.
Credit Suisse has also been criticised for its junior role in the Sports Direct debacle, as well as the price slump of moneysupermarket.com shares last month.
Both Credit Suisse and Merrill Lynch were involved in the Debenhams float last year and its shares still trade well below the offer price.
The banks, which earn massive fees from the deals, declined to comment, although privately bankers insist stock market volatility has taken its toll on new listings. But there have been successes in this time - suggesting that certain stocks were mispriced.
Whereas Sports Direct shares have crashed from 300p when it was brought to the market by Merrill in February to 143p today - costing investors more than £1bn - shares in investment firm Hargreaves Lansdown have soared from the 160p set by Citigroup when it listed in May to 208¼p today.
Fears are growing in the City that offer prices on many IPOs are being set too high.
Stephen Whittaker, head of investment at New Star Asset Management, said: 'I completely avoid new issues because they tend to be pretty fully priced.
'They can offer better value opportunitiesline.' some months down the
Shares in the nine biggest firms Merrill has brought to the market in Europe, the Middle East and Africa in 2007 have plunged by an average of 13.1% - losing investors £1.6bn.
The value of the 10 top firms listed by Morgan Stanley has fallen by an average 5.1%, while the 10 run by Goldman Sachs are down 4%, according to the figures compiled by Bondware and Factset.
Whittaker today said the 300p offer price for Sports Direct was ' questionable', and retail analyst Nick Bubb, of Pali International, reckons the shares will fall as low as 125p.
Another City analyst added: 'The pricing was wrong and they haven't helped themselves with corporate governance and communication with shareholders, of which there has been little.'
Other major fallers from the Merrill stable this year include self-storage company Safestore, which has dived from its debut price of 240p in March to 171p today, and miner Polymetal, which has lost around a fifth of its value.
Credit Suisse's handling of the moneysupermarket.com float raised eyebrows in the City. The shares debuted last month at the bottom of the range at 170p and fell to 157p, wiping nearly £70m off the firm's value. The shares now trade at 161¼p.
Last month's London listing of Turkish drug firm EastPharma and Alliance Bank, Kazakhstan's top retail lender, were also criticised. EastPharma lost 16% of its value while Alliance fell 11% - a combined total of about £60m.
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