Overpriced and short on appeal: IPOs struggle to impress
Fund managers say the poor performance of Nine Entertainment since its initial public offering is reflective of a wave of overly expensive floats and waning demand for new stock.
The Australian sharemarket is closing in on a year-to-date record of $10 billion worth of IPOs, but the run has culminated with fizzers such as Nine, transport company McAleese and industrial property landlord Industria REIT.
Nine, the commercial free-to-air television, digital and events business is trading about 9 per cent below its listing price. There are a range of reasons for this, including some of Nine's hedge fund owners selling out of the stock and concerns about the internet luring viewers away from television.
Fund managers say the disappointing debut is part of a broader theme of overpriced floats.
"There's no doubt some of the groups have been ambitious in the pricing they wanted to achieve," Ausbil Dexia chief executive Paul Xiradis said.
"With all new issues there's got to be an element of discounting to listed counterparts because the listed counterpart has a trading history and is generally well known among the investment community.
"Clearly the market is saying there has not been enough of a discount with many of these floats."
Clime Asset Management chief investment officer John Abernethy was particularly scathing of Nine, saying it was "excessively priced".
"Given headwinds with the convergence of media and the internet, as well as concerns over economic growth that could hurt the advertising market, I think Nine was overpriced," he said.
Mr Abernethy said a declining manufacturing sector, evidenced by Holden's decision to pull out of Australia, as well as a slowing mining industry would lead to weaker economic growth, which would likely crimp the advertising market.
Nine is understood to be comfortable with the amount of "quality institutional support" the float received.
Perpetual head of equities Matt Williams said the poor performance in recent floats showed investors were getting fatigued by the wave of listings.
"Of the 15 [recent] floats, only five are trading above issue price, and two of those only barely," he said. "It's a broad statement but clearly pricing expectations will have to be tempered given these statistics."