The Saga Group (LSE:SAGA) floated it’s IPO on the London Exchange today. Saga’s share price closed at the same price it was offered: 185.00 pence, after a short period spent at 189.00. As usual, there are at least two side to the story. The plot of one is that it was a successful IPO, raising £550 million ($928 million), giving the company a total market value of £2.1 billion. The plot of the other story is that the IPO was disappointing because because offer and the close were at the low end of the expect price range that was £185.00 to £245.00.
Half-full or Half-empty?
Instead of trying to see if the glass is half-full or half-empty, let’s try to see what’s in the glass.
- There is an additional £550 million pounds of cash in the glass.
- There will be significantly less debt in the glass as a result of the influx of cash.
- The are investors in the glass: more people who are vested in the success of the company.
How About That Timing?
If you were to pick the ideal time to offer an IPO, this would not have been it. The markets have bee inundated with IPOs lately. On top of that, the investors have got to be getting IPO-weary following what has been a considerable run of IPOs so far in 2014. Investors are not ready to jump on every ship that sets its sales and not every investor is interested in every ship that sales.
Saga executive chairman, Andrew Goodsell indicated that “We have been very pleased with the level of demand for Saga shares.” Although bankers typically “regard a successful float as one in which the shares rise 5pc-10pc on the first day of trading,” Saga was able to obtain the funding it needed and the price did not fall below the offer price. In fact, because Saga chose to scale back the institutional investor offering in order to give more access to retail customers.
It’s more than just a little bit difficult to determine what is or is not driving investor decisions at this point, for Saga or for anyone else. I do think it is fair to agree with Goodsell that the company should be pleased with the result. In the meantime, we look forward to seeing what happens when trading resumes.