Monday 28 June 2010

Is The City losing it?

Two stories from over the weekend may not make for great reading in the Investment Banks and London Stock Exchange today.

Firstly there is DP World pulling its long running idea of a secondary listing in London (which in many ways would be a re-list of P&O, the business DP World bought a few years ago).

Then there is news that Fitness First, the globally expansive gym business, is going to look to list in Asia rather than London - a loss of another £1 billion pound float.

There is a trend not to list in London emerging, but in fact with these two it is not the case. Dubai World is really struggling under its debts and stricken financial position. It clearly can't even get its accounts in order to try and push a float.

Fitness First is a loss-making Private Equity owned vehicle whose owners are desperate to get some return for their investment. In the Far East perhaps they hope to find some less discerning investors who believe their hype about EBITDA growth instead of looking at the bottom line. A classic case of Tourism IPO.

In fact, with BP getting shredded in the US, it is quite likely that New York will see another decline in foreign companies wanting to list there as well. Clearly the threat will be from Hong Kong and Singappore in the future, but it is not all downside for The City yet.


Steven_L said...

I remember reading a story in Alphaville a little while back that reckoned PE will takeover UK listings and relist them in Japan - letting Japanese savers bid up the assets.

Sounds a good idea to me, anyone want to lend me a few £billion?

Nick Drew said...

Russian & FSU companies have increasingly been using Hong Kong in the past year or more

CityUnslicker said...

ND - Yes, for the same Tourism IPO reason. Competing regulatory frameworks still exist shock...whining lefties should really think through the consequences of Communist China playing by the dirtiest set of mercantilist rules.

SL - Hmm, massive currency risk to that, although the principle works as it is the fitness frist idea really.

Steven_L said...

Then borrow the money in the local currency, hedge it while you buy a couple of British insurance companies, then merge them, list a bit of them, and pay the loan back in the local currency interest only for 10 years as we drip feed it into the Nikkei.

Maybe we could persuade Nick to cash in his gold and lend us a couple of hundred billion yen instead?

measured said...

Quality, not quantity. That is how you build kudos. Fret not.

Sebastian Weetabix said...

hmm. Market share matters, in most markets.

measured said...


Market share, rating and profitability. All three matter, but the emphasis on each differs at different stages of the cycle so you'll rarely please everyone all the time. A double dip is on the cards so who wants to float anything now, except those who want to realize their investment? This won't be defensive stocks. Neatly coming back to agreeing with the point of this post.

Sebastian Weetabix said...

Once you lose market share, you don't easily get it back.