FRANKFURT/LONDON (Reuters) – Shares in German cable television company Kabel Deutschland (KD8Gn.DE) were flat in a lacklustre market debut on Monday, the biggest in Europe so far this year, signalling the fragility of investor appetite.
The initial public offering (IPO) on the Frankfurt stock exchange, which was 2.2 times covered, amounted to 759 million euros ($1 billion) including a greenshoe.
“Investor sentiment has improved moderately, but it continues to be finely-balanced on the basis of price,” said a head of European equities at a large fund house in London.
“There is potential for the market to absorb new listings, but if the pricing is not right, deals could still fail,” he added.
KDG’s market debut is being closely watched by market participants as a barometer to measure investor appetite for private equity-led flotation — chemical distributor Brenntag, which is planning to raise as much as 837 million euros in an IPO that values it at a 20 percent to 30 percent discount to its peer Bunzl (BNZL.L), is set to close and price Friday.
“All in all, this is a good day for the IPO market…It shows that the market wants to see good companies ant it is prepared to support them,” said Philipp Meier-Scherling at Deutsche Bank, one of the bookrunner of the KDG offering. Other bookrunners include Morgan Stanley (MS.N), J.P. Morgan (JPM.N) and UBS (UBSN.VX).
So far, only five of this year’s 12 IPOs in Europe are still trading above their offer price — potentially dissuading investors from participating in new deals.
Shares in Kabel Deutschland were trading at 22.32 euros by 0944 GMT on Monday, having opened at 22.50 euros.
U.S. private equity owner Providence Partners priced Kabel Deutschland shares at 22 euros per apiece on Friday — at the lower end of its initial price range, valuing the firm at a forward enterprise value-to-earnings before interest, tax, depreciation and amortisation (EV/EBITDA) of 6.85 times.
The IPO puts KDG at an equity value of 1.98 billion euros and an enterprise value of 5 billion euros including net debt of 3 billion euros.
The valuation is in line with Belgian cable operator Telenet (TNET.BR), which fell 1.85 percent to trade at 21.50 euros at 0956 GMT.
By Eva Kuehnen and Daisy Ku
(Additional reporting by Raji Menon; Editing by Erica Billingham)