Noble sees resurgent listings climate when crisis eases

Published on Friday 11 April 2008 21:26

LISTINGS in London have plummeted in recent months, but the feeling from Noble Group seems to be that the slump in activity could prompt a correspondingly sharp rise when stability returns.

The Edinburgh-based investment bank this week revealed it had sold a 19.3 per cent stake to Arch Group at a time when UK investment banks are struggling for funds. One report claims listings in the first quarter of 2008 were down 75 per cent on 2007.

Even Noble had arranged for individuals to underwrite the company, before Arch pumped a significant amount of cash on to the balance sheet.

But the slowdown has created a potential flood of new issues when stability and investor appetite return.

John Llewellyn-Lloyd, Noble's head of corporate finance, told The Scotsman that the group now had a queue of around 30 clients who, "all else being equal", would have floated or raised secondary funding.

"A lot of people have their plans on hold while they let the situation calm down," he said.

Noble's clients, Aim-listed firms and small caps, have been hit hard by "an unhappy confluence of circumstances" – the credit crunch, capital gains tax, and investor redemptions – Llewellyn-Lloyd, noted.

Henry Chaplin, chief executive of Noble Fund Managers, warned that the disconnection between the financial markets and the underlying health of potential new issues was placing a generation of future businesses at risk.

"The brokers just aren't ringing up the institutions and saying 'please give me money for company X' because there's going to be no liquidity in the market (after a flotation], and they don't know how to price it."

But there is now a view that conditions should begin to recover. Llewellyn-Lloyd believes that the low point has been reached, and the next quarter or two will show a "cautious recovery", or even potentially a wall of issues.

"Our view is that we must be pretty near the bottom, and that we will see a steady recovery over the next few weeks," he added.

"These things can pick up very, very quickly. Once confidence returns it could be that there's a very fast return of IPOs (initial public offerings]."

Chaplin believes that because there is such a large group of companies seeking equity funding, investment bankers will take the decision to head back to the market for funds when stability returns, even if investor appetite for such new issues is not at the same level as a year ago.

"As soon as stability to pricing returns, these issues will go ahead, because these companies need funding," he said.