Another very negative article too. I most likely will give this a miss, unless it does a QR National.
Greenstone hit by deal fatigue
Australian fund managers are braced for a repricing or scaling back of insurance distributor Greenstone next week as choppy market conditions and the poor performance of several large-scale issuances leave investors with a growing sense of fatigue.
While the ASX-aspirant may succeed in drumming up sufficient demand from offshore buyers for its $809.7 million-$984.2m targeted equity raising, the debate around Greenstone’s valuation underscores the frustration that has gripped the market.
Several high-profile domestic investors have stated they will not participate in the float, while others have said they will take stakes at the bottom end of the $2-$2.50 pricing range.
This lukewarm response has dogged Greenstone, which distributes insurance products and owns the Real Insurance business that sells life, pet and funeral cover, from the outset.
Investors have questioned the valuation of its policies and have mixed views about the pricing after a string of meetings this week between the joint lead managers, Macquarie and Goldman Sachs, and prospective investors.
Even lead managers Deutsche, Citi and JPMorgan don’t seem to agree. The latter issued a report valuing the company at 11 times forward earnings, below the bottom end of the valuation range, generating further alarm among investors.
Yet while fund managers quibbled about the price, most still regard Greenstone as an attractive business. Three months ago the two sides may have been closer aligned.
Greenstone’s greatest difficulty may be that it has run into a fresh outbreak of deal weariness.
Investors don’t have to look far for reasons to be disgruntled. MYOB, Bain Capital’s accounting software firm and a marquee float of 2015, continues to trade below its market issuance price of $3.65.
Then there is NAB’s entitlement offer. While the option for retail shareholders to purchase two NAB shares at $28.50 for each 25 NAB shares they own has been hailed as a well-priced deal, many in the market expect the shortfall will hit $800m.
A bookbuild to hoover up the remaining shares will be launched after market tonight.
While there are numerous examples of smaller IPOs performing well — Eclipx soared 20 per cent on its debut, and the market has also embraced Adairs — the upswell of frustration underscores the long-running tension between investment bankers and their two main sources of revenue — the sell-side clients like private equity firms who demand robust valuations, and their network of buy-side clients, that are often called upon to soak up large block trades.
Aside from Greenstone, a handful of IPO hopefuls like Metro Property Group, Amaysim and Murray Goulburn will have to face these more testing conditions.
As DataRoom revealed yesterday online, Metro Property is seeking to tap public market investors for $225m and has priced its float at $2.25 a share. That gives the developer a market capitalisation of $448.1m.
Amaysim, meanwhile, is poised to embark on its roadshow at the end of the week, as the low-cost mobile operator seeks close to $300m from investors. It will list in July with a market capitalisation of $400m-$500m.
