Our figures today on London stock market floats of the past five years make for grim reading if you are an investor.
The short version is: if you had bought into all of them, if you believed the bankers’ hype, then you are down half your money.
Fund managers and bankers complaining that there is now a buyers strike on UK shares need to look a little closer to home to understand why.
So far, the debate has been about how to boost London’s attractiveness as a place for brilliant new businesses to raise money and float on the stock market. Perhaps those floats need to be better value for money in the first place.
Perhaps London shouldn’t go chasing every tech float going since there’s a good chance that company will turn out to be a flop.
The problem is that bankers promise high valuations to company owners and flog those values to investors who are rather tired of getting burnt fingers.
This isn’t just a London issue. The IPO market has been soggy in most places lately. New York might win the biggest tech floats, but they usually turn out to be overvalued too.
Our figures pose the question of whether the FCA should spend less time on relaxing listing rules and more time ensuring confidence by bringing in robust requirements for forecasts, and “independent” valuations that surround such floats, so investor trust is restored.
London could distinguish itself by being the market with the highest standards. A place where it is not easy to raise £5 billion, but if you do, that’s a seal of approval from the stock market’s Premier League.
Bankers always want less regulation. They might instead think that proper regulations would protect their clients and their own good names from backing the float flops.
