Shares slump as Pact joins growing list of float flops
Pact Group Holdings chairman Raphael "Ruffy" Geminder has been forced to defend the timing of his company's initial public offering after the plastic packaging manufacturer became the latest, and largest, disappointing float.
Shares in Pact immediately fell below its $3.80 issue price upon debut on Tuesday, opening at $3.50 before rising to $3.60. However, by the end of trading, Pact shares had slumped 13 per cent from the issue price to finish at $3.32.
Another market debutant, property management firm GDI Property Group, fell 12 per cent in its first day of trading.
Pact raised $649 million from investors through the offer of 170.7 million shares at pre-float, with Mr Geminder maintaining a 40 per cent stake in the company.
Mr Geminder said he was "pleased with the support we've received from investors and the market, making Pact the largest IPO of the year" and said it was not "productive to focus on short-term market volatility".
"We are in this business for long-term growth," he said. "This is a practical business full of real infrastructure - we manufacture real things that consumers interact with in their day to day lives. I think that scale and a defensive business model are certainly positives in a volatile world."
The Pact float continues the trend of disappointing ASX debuts in recent weeks, with both Nine Entertainment Co and Dick Smith trading below their issue prices.
After finishing at $1.92 on Tuesday, Nine shares are still well below the $2.35 float price earlier in December, while Dick Smith shares hit a fresh low of $2 before recovering to $2.05. It listed at $2.20 on December 4.
Fund managers on Tuesday expressed concern about Pact's debt levels and IPO pricing. "We thought the debt and pricing was too high and didn't buy stock, and you saw why today," one fund manager said.
Mr Geminder said Pact's debt of about $603 million after the float, which is about three times the 2014 financial year EBITDA forecast of $202 million, should not be a concern to investors.
"As far as the debt levels go ... we are not out of step with our global peers, Mr Geminder told Fairfax Media earlier this week. " This is also a business that spits out a lot of cash flow."
Listing documents released to the ASX on Tuesday revealed few large Australian institutional investors, with AMP a notable exception. Sydney businessman Gary Wolman emerged as a large shareholder with about 6.3 million shares as part of a deal whereby Pact will acquire his Cinqplast Plastop Australia business and a share in a manufacturing plant in the Philippines.
Mr Geminder has explored going public or having a partial sale several times, including an aborted deal with private equity firm KKR & Co in 2012, before this year's renewed appetite for floats led him down the IPO route again.
His wife Fiona Geminder is the daughter of the late Richard Pratt. Mr Geminder's brother-in-law, Anthony, is the executive chairman of the Pratt family cardboard manufacturing and recycling giant Visy.