editorial

Market wobble hits flotations

• FROM: June 2006 |
• TAGS: brinkley mining, igm |
• COMMENTS: Add yours

• Market wobble hits flotations
• | Printer-friendly version

It was always going to be one company's bad luck to float just as the market hit a major wobble, and it is Brinkley Mining that has won the bad timing award this time around.

Brinkley came with strong credentials. Gerard Holden, the former head of mining and metals at Barclays Capital, has the chair, and its big shareholders include Lonrho Africa and Aussie mining specialist Atomaer.

All of which counted for not a jot as the shares dived 40% on day one and now sit at 30p compared with a 50p placing price.

Early investors sold and there was not enough demand in the market for the shares. Beaumont Cornish is the nomad taking the flak for the float arrangements.

But it is not just mining companies that are finding it tough. Chinese mobile telecoms content company IGM lost more than one-fifth of its value after it joined AIM.

IGM is a business that is still at an early stage of its development. The pre-new money flotation value was £30m while pro forma turnover for 2005 was £3m. That valuation assumes rapid growth in China, India and elsewhere in the Far East.

A couple of months ago investors were willing to look that far ahead but under the present market conditions they are less willing to pay for what might happen.

It means that if a company doesn't have revenues and profits to underpin its share price it can slide.

For example European Islamic Investment Bank only started trading on 3 April and floated six weeks later. It has no track record and this is probably the reason that the shares have nearly halved.

All three companies could yet have highly successful futures, but in these markets that doesn't count for much.

AIM has been a fantastic success story, but the acid test was always going to be how liquidity and investor interest stands up when the going gets rough.

If the current volatility continues for much longer we could beabout to find out.

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