Foxton estate agent shares

moneylover

I have been very confused by the way Foxtons has come to market. I appreciated that shares were placed with institutional investors but all the newspapers talked about them being on the LSE from today. In fact it was 'conditional trading' from today and normal trading is from 25th Sept. I doubt I will be buying any of the shares as they came to market at top of price range and have already gone up 20% today but please can someone explain what this conditional trading is? Thanks.

Ifts

Got this explanation re conditional/unconditional trading from the Motley Fool site:

Q: What is conditional and unconditional trading?

A: Some, but not all, flotations came to the market in two stages. Before the shares become officially listed on the Stock Exchange they can be traded off exchange. This is known as conditional trading and this normally begins as soon as the offer price for an issue is confirmed. The vast majority of trading at this time is between financial institutions. It is possible to deal at this time as a private investor but it is a risky practice as the issue may be cancelled and you will not have received your share certificate.

Unconditional trading is when a company is officially listed on the Stock Exchange. Normally there is a one week gap between the start of conditional trading and the start of unconditional trading.

http://boards.fool.co.uk/faq-frequently-asked-questions-6417647.aspx

Ifts

moneylover wrote: »

I doubt I will be buying any of the shares as they came to market at top of price range and have already gone up 20% today

Questor seems to agree with you -

Questor share tip: Shares in Foxtons are one to avoid

http://www.telegraph.co.uk/finance/markets/questor/10324820/Questor-share-tip-Shares-in-Foxtons-are-one-to-avoid.html

dryhat

Classic pump and dump.

sabretoothtigger

I was going to post the Questor review. Thats a good column and they often advise to avoid hype and top of the hill type run up in prices.
There is a new Questor editor writing though, so Im still weighing him up

dryhat wrote: »

Classic pump and dump.

not quite that bad :laugh:

Ark_Welder

In a good many cases it is probably sensible to avoid IPOs unless the capital being raised is to be used to expand the business - a productive use of capital that should provide a growing return to the investor over subsequent years. In other cases, the capital just goes into the pockets of the pre-IPO shareholders, which always begs the question: if the prospects for the company are likely to to good (as opposed to how the prospects have been), then why are the current shareholders selling?

Another potential pitfall of IPOs from PE-owned companies is the level of debt in the company being launched. What does happen, on occasion, is that a private equity operation will raise debt to purchase a company (which may or may not be listed), that company will then issue debt, the PE operation will be paid a 'dividend' that more than covers the repayment of the debt that it took out, the company is eventually sold on to a third party which might be via an IPO.

I can't say this has happened in the case of Foxton's, nor what the level of debt - if any - Foxton's has. Just that it is something for prospective buyers to investigate for themselves. Nor should it be taken that this process happens in every PE episode, just that it has and it can. Nor should it be confused with IPOs from venture capital-owned companies, because those VC operations will have originally provided capital to allow the company to grow and are now taking out their return - although remembering that that return might be timed at the most opportune for them, rather than the purchaser.


And... this is posted by a holder of PE investment trusts, which benefit from such launches. But I can't say one way or the other whether I indirectly benefit in this specific case - too much like hard work for a Sunday evening.

Freecall

Question :

Ark_Welder wrote: »

if the prospects for the company are likely to to good (as opposed to how the prospects have been), then why are the current shareholders selling?

Answer :

Because the current shareholders are exceptionally risk-sympathetic (eg entrepreneurs) and have other things they want to do with their capital.



The basic tenet of your post is valid but releasing capital back to the founders of a business is a well established and legitimate reason for conducting an IPO.

.

Ark_Welder

Freecall wrote: »

The basic tenet of your post is valid but releasing capital back to the founders of a business is a well established and legitimate reason for conducting an IPO.

Founding capital might apply to venture capital, but not necessarily to private equity.

bigadaj

Freecall wrote: »

Question :




Answer :

Because the current shareholders are exceptionally risk-sympathetic (eg entrepreneurs) and have other things they want to do with their capital.



The basic tenet of your post is valid but releasing capital back to the founders of a business is a well established and legitimate reason for conducting an IPO.

.

The current owners are mainly private equity who bought the original founders out several years ago. They are no doubt disappointed they haven't managed to flip it before now, but see an opportunity to get an iPo away. It's interesting the have the confidence to act now, but I'd be wary.