‘Float fever’ is hitting the City as we see the government and companies selling off shares in companies they own in a bid to raise cash. This means there is a newly diversified and broadened range of opportunities that are or soon will be available for investors, so it may be worth having a nose around.
DFS recently announced it plans to line up a stock market flotation that would value the high street furniture chain at up to £1 billion. Another new entry currently making waves on the stock market is Royal Mail, which I discussed a fortnight ago. This highly contested sale is worth around £3.2 billion and is due to hit the stocks in the coming weeks.
Pictured above: the furniture giant recently announced its flotation
But don’t post your cheques just yet (even if it is by recorded delivery). The general consensus is that the persistent strikes and contention over Royal Mail’s privatisation could negatively affect share prices, so investors with their eye on a slice of the postal stalwart should approach this opportunity cautiously as it is not a trouble-free institution.
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Shortly afterwards came the government’s sale of six per cent of its stake in Lloyds Banking Group, worth £3.3 billion, which is proving hugely popular with eagle-eyed American investors.
Read more on the Lloyds Banking Group flotation from Spear’s
I reckon that sizeable float will most likely take to the market like the world’s largest rubber duck (the one that floated into Hong Kong in May, pictured left) takes to water. You’d be, um, quackers not to look into these shares.
Surprise sell-off
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Among other stock market entries, this time in the private sector, was House of Fraser’s surprise return to the stock market in August, valued at £200-300 million, which followed several aborted attempts by its shareholders to sell the business. Interestingly, the recently afloat Lloyds was one of its significant shareholders, so this sell-off must have nicely kick-started the recovering banking giant’s liquidity boost.
The list – and listings – of companies hitting the stock exchange goes on. Unlike most financial products, the current high level of flotations can be explained in simple terms, and was nicely summed up by the Sunday Times, ‘A buoyant stock market and hopes of a sustained economic recovery have prompted a growing list of private firms to try to raise money on the stock exchange’. I would also add state-owned organisations to that list, though.
What’s more, companies worth more than £40 billion are expected to debut on the market over the next twelve months. So if you’re downcast about your bond investments – under threat from the Fed’s tapering of its government bond-buying programme and an imminent rise in interest rates – perhaps it’s time to peruse the exchange market. Buoy, it’s well stocked at the moment.
