BC-UK-IPO-FREEZE-ELECTION-UPDATE1
IPOs in U.K. May 'Freeze' Before Election, Shore Says (Update1)
c.2009 Bloomberg News
(Adds IPO statistics in sixth paragraph.)
Dec. 21 (Bloomberg) -- Initial public offerings in the U.K. may "freeze" as much as eight weeks before the next general election, said Howard Shore, the executive chairman of London- based investment bank Shore Capital Group Plc.
"Past experience tells us that when an election's coming up the IPO market tends to freeze within six to eight weeks" ahead, Shore said in a phone interview on Dec. 15. "I'd be cautious about anything happening that is particularly dependent on, or relevant to, the U.K. economy between March and June."
IPOs almost evaporated this year as declines in stock markets made offerings less lucrative and the credit crisis cut off financing for takeovers, hurting revenue stockbrokers earned from advising on fundraisings and mergers. A general election must be held by June.
There will be "a lot of uncertainty" from companies that are "too U.K. dependent" before the forthcoming election, Shore said. Commodities companies may feature in the IPO market next year, assuming commodity prices "hold up", he said.
Stockbrokers are seeking to profit from rallying stock markets. The FTSE 100 Index had the best quarter in its 25-year history in the three months to Sept. 30 as companies reported higher-than-expected earnings and house prices rose, suggesting the worst of the recession is over.
Historical Precedents
In 2005, when the general election was held on May 5, IPOs in the U.K. raised $2.2 billion in the first half of the year, or about nine percent of the total raised in Europe, and $5 billion in the second half, or 13 percent of Europe's total, according to data compiled by Bloomberg. In 2001, when an election was held on June 7, IPOs in the U.K. raised $1.5 billion of the $20.1 billion raised in Europe in the first half of the year and $2.7 billion out of a European total of $13.7 billion in the second half.
"Of course the markets will be interested in the election coming," Tim Linacre, chief executive officer of the 133-year- old British stockbroker Panmure Gordon & Co., said in an interview. "But I don't think markets come to a grinding halt. There are deals that are going to get done."
Linacre would be "disappointed" if Panmure did less than three or four IPOs next year and "wouldn't be at all surprised if we did twice that," he said. "If I look at the U.S. and the U.K. combined, then we've got a large number of IPOs slated for next year."
Shore declined to discuss the number of offerings the bank is preparing for 2010.
For Related News and Information: Top Financial News: FTOP More news on initial public offerings: NI INI Shore earnings: SGR LN TCNI ERN
