Think about a but further.... it lost 33% of it market cap because most investors thought it would beat its forecasts... now they know that is not the case.. they believe it is not worth its IPO price. They are also stating that they will miss other metrics as well.
Once again.. you cannot put a price on trust! And with companies that have floated so recently like this... it doe snot look good! Article just out
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Scottish Pacific downgrade adds to PE IPO doldrums
by
Michael Smith
Another day, another under-performing private equity float.
Shares in debt finance group Scottish Pacific have fallen 26 per cent after downgrading earnings guidance on Monday due to lower-than-expected levels of borrowing from large clients for the first four months of the year.
Next Capital raised $293 million floating the group at $3.20 in July and the stock has performed relatively well up until now. Citi analysts told clients in August that they expected to stock to hit $4.19, citing the company's growth prospects as it has 20 per cent of the debtor finance market. Citi and Goldman Sachs were joint lead managers to the float.
Scottish Pacific shares were trading at $2.76 by late afternoon Monday.
Chief executive Peter Langham said there was a negative shift in client borrowings as a percentage of monthly turnover in July. The company had already been expecting a negative impact in July because of the federal election. Borrowing levels for the first four months of the financial year were also lower than expected.
The company's revised forecasts are based on the assumption there is no uptick in borrowing levels for the rest of the year. It has resulted in a 7.5 per cent decline in forecast net revenue of $8.2 million. It is now forecasting profit before interest and tax of $40.7 million for the year end-June 2017 compared to prospectus forecasts of $44.9 million.
A string of downgrades to prospectus forecasts just months after listing are leaving investors increasingly nervous about the IPO market. Private equity firm TPG cut the price for the $1.2 billion float of chicken producer Ingham's to $3.15 compared to an initial price range of $3.57 to $4.14. The shares were trading at $3.18 on Monday.
There are growing questions around the quality of IPO prospectus forecasts. Dick Smith Holdings is the most high-profile private equity collapse but Spotless and Healthscope have also run into problems. A string of floats, and not all them private equity have been re-priced of shelved over the last month, partly due to volatile markets which have not been helped by the surprise US election win for Donald Trump.
Another TPG float, Alinta Energy, is also expected to be put on hold until February next year due to market volatility.
Investors say they are increasingly sceptical about private equity floats but partners with some buyout firms say the issue has been inflated by all the noise around Dick Smith and PE floats often out-perform other companies. Buyout firms are worried about the reputational damage though and are looking at ways to improve their image, particularly amongst retail investors.
MinterEllison says Australian private equity had a strong year in the 2016 financial year, boosting mergers and acquisition activity to 20 per cent compared to a 4 per cent rise in 2015. A big contributor as private equity activity in the healthcare such as an exit by KKR from GenesisCare through a trade sale to Macquarie and Chian Resources for $1.7 billion.
"Home care is the hot trend, with government policy favouring consumer directed care. This has led to increased interest by PE in allied health services in both the aged care and disability sectors, with the National Disability Insurance Scheme also creating opportunities for PE," MinterEllison private equity partner Ricky Sasali says.
