Discount retailer Poundland enjoyed a bumper start to life as a listed company, with shares rising 23 per cent on their first day of trading, valuing the chain at almost £1 billion.
The performance was in marked contrast to fellow City newcomer Pets at Home, with shares in the pet accessories retailer falling below their initial public offering (IPO) price.
Amid a flurry of flotations for the retail sector, both private equity-backed firms priced their shares towards the top of their ranges today, but Poundland saw the most demand and the offer was more than 15 times oversubscribed, according to one source.
Tom Robertson at Accendo Markets said: “This issue is proving popular, like most budget stores, as the need to cut back and spend less in these austere times is sending business their way.”
With a strong performance from recent flotations such as online electricals retailer AO World, Legoland owner Merlin Entertainments and Royal Mail, Robertson added: “I’d be surprised if Poundland doesn’t follow suit.”
Other firms such as internet fashion business Boohoo and department store group House of Fraser – owner of Edinburgh institution Jenners – are also expected to join the IPO rush.
Poundland was initially valued at £750m after pricing its shares at 300p, and raised £375m through the flotation. All proceeds went to selling shareholders, such as private equity outfit Warburg Pincus, and not the company itself.
Warburg Pincus is expected to retain a stake of more than 30 per cent, while directors and senior staff – led by chief executive Jim McCarthy – will have 10.2 per cent of the company.
Since opening its first store in Burton-on-Trent in 1990, the chain has grown to nearly 500 outlets in the UK and plans to double that number. It also operates more than 30 stores under the Dealz brand in Ireland.
McCarthy said: “The combination of a track record of delivering strong, profitable growth underpinned by a well-invested infrastructure and a compelling growth story has attracted overwhelming support for Poundland’s IPO.”
Pets at Home shares started trading at 245p each, valuing the pet accessories retailer at £1.2bn. The flotation brought in £210m for private equity backer KKR, other shareholders and staff members.
Chief executive Nick Wood said: “We are delighted that our IPO has been so well received by colleagues, institutions and retail investors alike, who have recognised that this is a unique and differentiated business with multiple opportunities for future growth.” However, one trader said sentiment in the market amounted to a “shrug of the shoulders” and the shares ended the day at 238p.
Pets at Home claims to have a 12 per cent share of the market and more stores than its five biggest rivals combined. But it is keen to expand further, boosting its number of stores from 369 to more than 500, while it wants to almost treble the small animal veterinary surgeries it operates to more than 700.
Unconditional share dealings in the two companies will start on Monday.
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