Company Initial Public Offerings should not be viewed as a golden ticket, Warns Brewin Dolphin

Buying into the excitement over companies’ Initial Public Offerings may not be a golden ticket, warns wealth manager Brewin Dolphin.

Tim Walker - Divisional Director and Head of Office, Brewin Dolphin Exeter

Research from the group shows that, of the seven companies that debuted on the UK stock market in the last twelve months, four are currently trading below their flotation price and only two have left investors sitting on significant gains.

“The hype surrounding the Royal Mail float may encourage people to think that buying shares when a company floats is a sure-fire way to make money,” warned Tim Walker, Divisional Director and Head of Office Brewin Dolphin Exeter: “Our experience along with our research show that people need to be far more careful than this.”

Royal Mail shares, which floated at 330 pence per share, have given their investors a gain of over 50 per cent since July last year, prompting many retail investors to feel that they missed out on profit as individual allocations were limited.

However, investors in Saga, Pets at Home and Infinis Energy are all nursing losses. Infinis shares were down almost 20pc from their flotation price at the time of writing.

Merlin Entertainments, owner of Madame Tussauds, has seen its shares rise 18pc since its debut in November last year, but Tim Walker warned that this was the exception rather than the rule.

“Investors should be careful not to get their fingers burnt,” he said. “Be aware that companies always float for a reason. One reason could be to maximise profit for the company’s current owners and as with any share investment, you should consider how well your own interests will be served by the purchase.”

www.brewin.co.uk/offices/exeter

ENDS

Performance of recent UK IPOs with retail allocation

Announced Date	Issuer Name	Offer Size (M)	Offer Price	Last Close	% change since IPO*
11/04/2013	Infinis Energy Plc	237.906	260	208.5	-19.81
10/21/2013	Merlin Entertainments PLC	1052.67	315	372.6	18.29
02/19/2014	Pets at Home Group Plc	490	245	216	-11.84
09/24/2013	Riverstone Energy Ltd	760.352	1000	890.5	-10.95
07/10/2013	Royal Mail PLC	1980	330	501	51.82
04/30/2014	Saga Ltd	550	185	179.25	-3.11
05/27/2014	TSB Banking Group PLC	362.5	tbc

*% correct on 11.6.14

Performance of UK IPOs with retail allocation over past five years (above, below or in line with floatation price)

	Up	% of total	Down	% of total	In-line	% of total	Total
To Date	17	44.7	18	47.4	3	7.9	38
First Day	25	65.8	10	26.3	3	7.9	38
First Week	26	68.4	9	23.7	3	7.9	38
First Month	24	63.2	10	26.3	4	10.5	38
First Year	15	39.5	15	39.5	8	21.1	38

Performance of all UK IPOs over past five years (above, below or in line with floatation price)

	Up	% of total	Down	% of total	In-line	% of total	Total
To Date	107	42.0	97	38.0	51	20.0	255
First Day	169	65.8	39	15.2	49	19.1	257
First Week	153	59.5	48	18.7	56	21.8	257
First Month	136	61.8	59	26.8	25	11.4	220
First Year	72	50.0	61	42.4	11	7.6	144

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