What, no IPO?

Thu, 25 Oct 2007 12:09:00 GMT

Earlier this month Cityblogger was looking forward to tucking into some new issues, and polishing his best cutlery in anticipation.

The enticing thing about new floats is that they are fresh and new – the companies’ management are often wide-eyed and full of hope. Their naivety about the City can sometimes be charming – well, with the great exception perhaps of our friends at Sports Direct who have turned it into an art form. And investors can cast off their frustration at other investments that have disappointed and embrace something new.

Argentinian-themed restaurant chain Gaucho and Wagamama were on the new floats menu. But it seems that credit jitters have put some companies off their stride. While Gaucho’s listing is still going ahead, Wagamama’s private equity owner Lion Capital got indigestion and is putting the noodle chain up for sale instead. Investors are thought to have choked on the proposed stock market valuation of £225m.

By all accounts the new issues market is in the doldrums. The boffins at Ernst & Young said this week that the number of new IPOs (initial public offerings) dropped by 75 per cent in the third quarter. What’s to blame – yes, you’ve guessed it, the good old credit crunch.

On the front line the story, sadly, corroborates E&Y’s findings. “There haven’t been many this year but there are IPOs out there – you’ve just got to have a bloody good story before you approach the investors,” says Cityblogger’s tame PR guru. “And it’s always difficult for the smaller companies [to get air time]. We’re not in the heady days of the internet bubble or 2005 when it was very busy for floats. I’ve seen a lot of companies who’ve said ‘yes, we’ll be floating’ and then heard nothing from them again.”

However, she thinks things could pick up in 2008. “There’s a lot of floats queuing up for next year,” she says. “The first half of 2008 should be busy, but then again they might be put back to the second half. And there are doom and gloom merchants who are mentioning the ‘R’ word [recession]. Look at Merrill Lynch’s results today.”

Jan Luthman, director at Walker Crips Asset Managers, agrees. “It’s been very quiet,” he says “We haven’t seen anything, certainly nothing of appeal. People are finding it difficult to raise capital and sentiment is moving towards the large cap companies. Smaller companies and the FTSE250 have taken a pasting this year and the chances of getting an IPO away are less rosy.”

Cityblogger has put away his cutlery for now. Well, a diet would probably be a good idea all round.

No Argy bargy

Thu, 04 Oct 2007 10:15:55 GMT

There’s not much Cityblogger enjoys more (apart from a nice juicy share tip) than tucking into a succulent steak in a stylish City watering hole. Especially when somebody else is picking up the exorbitant tab (although in emergencies Cityblogger has developed a technique of hiding in the little boys room when the bill arrives anyhow). And steaks don’t come much tastier or - let’s face it - bigger than those of the Argentine variety. Our Argy friends may not have faced down the ferocious Mrs Thatcher in their desire to ‘liberate’ the Malvinas but they do know what to do with a dead cow (unlike Damien Hirst in Cityblogger’s humble view).

So after a depressing few days with nothing but Northern Rock, Citibank’s losses and Carter & Carter’s problems to mull on, Cityblogger’s mouth began watering when he heard that Gaucho, which runs the Gaucho Grill chain of Argentinian-themed restaurants, is serving up an IPO (initial public offering) and returning to the London market after an absence of five years.

The company, which ironically was actually started in Amsterdam, originally listed in London in 1999 but was taken private in July 2002 by founder Zeev Godik and last year private equity outfit Phoenix Equity Partners bought up a 45 per cent stake in the firm following a secondary buy-out. Gaucho is raising up to £80m and should have a market capitalisation of around £100m when it floats.

And despite the broadsheet gloom-sayers who reckon we’re heading in a hand-cart towards a recession, Mr Godik believes the eating out sector is poised for more growth. He says the UK sector alone is worth £27.5bn a year, and should grow to £34.4bn by 2010, and that Gaucho, which made operating profits of £2.4m on revenues of £15.7m in the six months to 30 June should win a good slice of the action.

And city analysts are keen to tuck in. Richard Carter, analyst at Numis Securities, which is floating popular eatery Wagamama’s in three weeks’ time, says the market’s “very receptive” to restaurant companies. “There seems to be more appetite for it from investors, if you pardon the pun,” he says. “It’s a very attractive area. More and more people are [eating out because they’re] time poor.”

What’s more, Mr Carter doesn’t think the threat of an economic slowdown will deter the can’t cook/won’t cooks from eating out. “Tesco’s chief executive Terry Leahy said at the results this week he thought consumers have been incredibly robust,” he says. “I wouldn’t believe everything you read in the papers [about an imminent recession]. I had to wait 20 minutes in Costa for a coffee the other day [because it was so busy].”

Cityblogger will be pressing his (now rather tight) best eating-out suit in anticipation.

The inside word from the City: New floats

What, no IPO?

No Argy bargy