Anyone else worried about the release of shares from escrow period?
From the AFR:
Almost $3 billion in shares could hit the market over the next week as the first selling window opens up for the class of 2013-14 initial public offerings, including $1.1 billion in equity from credit score company Veda Group alone.
Big investors usually have to wait a specific, but variable, period of time before they can trade their stake following a float. The rush of IPOs in late 2013 and early 2014 coincides with the significant number of shares that could be released in the week ahead.
Packaging company Pact Group, of which around $465 million of shares are set to come out of escrow on Wednesday, has already gone on the front foot and released a statement asserting Geminder Holdings, its biggest investor, will not be selling. Geminder is the investment vehicle of Raphael Geminder, Pact’s chairman. Pact raised $1.7 billion in a float in December.
“The interesting thing about this reporting season is that it triggers the escrow to be removed from a lot of the recent IPOs and hence we expect to see a raft of sell-downs post this reporting season,” said Perpetual’s deputy head of equities, Paul Skamvougeras.
Not all organisations have been forthcoming around how much skin in the game their investors plan to retain.
The biggest potential source of equity out of escrow will be that of Veda Group which emerged as one of the strongest IPOs from last year. Private equity firm Pacific Equity Partners held 63.5 per cent of the company following the successful float which resulted in a 40 per cent price surge on debut.
Veda has disclosed that more than 500 million shares, valued at $1.1 billion, will be released from voluntary escrow on Wednesday.
A spokesperson for the company declined to comment on PEP’s intentions in light of the imminent release of its annual results and a self-imposed “blackout” period.
SO FAR THIS YEAR
The first test was electronics retailer Dick Smith Holdings, which on August 19 had almost 63 million shares due for release on the same day as its full-year numbers were revealed. Dick Smith beat market expectations with sales, earnings and net profit ahead of its prospectus forecasts.
Anchorage Capital Partners, which backed Dick Smith by taking the company private after its sale by Woolworths, told Dick Smith managing director Nick Abboud “in light of the recent trading results and our positive view of the company’s future prospects, we currently have no intention of selling at the prevailing market price”. That correspondence was released to the market.
However, Anchorage did appoint a broker to handle some or all of its Dick Smith stake down the track. Perpetual reduced its stake in Dick Smith to 10.66 per cent from 11.7 per cent on August 19.
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Nine Entertainment Co directors and its private equity owners, Apollo and Oaktree, will be closely watched on Thursday when more than $720 million of equity in the media company can be traded for the first time.
OzForex Group faces the prospect of 20,310,000 shares coming out of escrow later this year when its accounts for the period to September 30 are released. The stake is valued at almost $50 million on current prices.
After a strong IPO, OzForex has given up some of its gains when it revealed in early August that it experienced soft trading in the first quarter of 2014-15.
LEARNING FROM MYER
A feature of a number of IPOs over the past 12 months has been in the structure of each one that allows private equity investors involved to continue to own a significant portion of the business post listing.
This has given buyers comfort regarding alignment of interests following the disastrous float of Myer in 2009 when it listed at $4.10 but failed to hold on to that value.
There were 58 floats with a total value of nearly $14 billion in the 2014 financial year, making it the busiest year for floats since the global financial crisis.
According to numbers crunched by the The Australian Financial Review, excluding the float for the government owned Medibank Private, the pipeline for initial public offerings in the remaining five months of 2014 stands at more than $2.5 billion. Medibank could fetch as much as $4 billion.Healthscope’s IPO was an outright success and is tipped to help stoke interest in Medibank in the fourth quarter. Healthscope listed in July 2014 and at least 25 per cent of its shares will be subject to escrow until results to July 30, 2015 are released according to the prospectus. Management have disposal restrictions for two years.
Among companies that may have plans to list on the ASX include Estia Health, retirement village company RetireAustralia and cinema group Hoyts. Outdoor advertising companies oOh! Media and APN Outdoor, thought to be worth about $500 million each, are other float candidates.
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