Fundamentals need fixing to save the IPO revival

The company and its advisers insist that this was a well run business that had its flotation plans unfairly scuppered by London’s “extreme investor caution”. Strong words indeed. They say that the valuations being offered them by the City were 35% below their own expectations, a discount that was simply too big to swallow.

But ask around the City and some different views emerge.

There are mutterings about the 11 banks on the syndicate, which they say points to a lack of faith in the offering. There were also concerns that much of the $800million being raised would be used to fund a $500 million dividend.

As one City figure put it, a “raise of that size should be setting up for clear long-term growth, not an immediate pay out to people already on the register — appetite for this was lacking.”

Nevertheless whatever the legitimate quibbles, an about-face on this scale is not a good look for London given the recent decisions by the likes of ARM and CRH to snub London in favour of New York.

The big picture problem remains. Global confidence in UK capital markets remains low. We have seen it in the debt market where gilt yields have spiked in recent days. Now we are seeing it in the equity markets.

Until that fundamental issue is resolved, hopes of a major revival of IPO activity will turn to, well… ashes.