The dust has barely had time to settle on France Télécom's IPO of Orange. And yet it has already earned its place in the history books as one of the most significant deals of 2001.
It has set a troubling precedent for all those telecom companies that were desperately hoping to turn to the equity markets to raise funding and reduce their leverage. As the Orange price fell even after the lead banks had reduced the indicative offer price, anxious chief executives at telecom companies were asking their finance directors to somehow produce a refinancing plan B.
This was a deal that flopped and that hurt. That's evident from the blatant attempts of those involved to pass the buck in the days that followed the IPO on February 13. Rather than concentrating on exactly what went wrong with the deal, most are busy pinning the blame on each other. Investors are berating the bankers for failing to do their jobs properly and set a ceiling on the issue price. They are also accusing France Télécom of greed for trying to squeeze too much out of them.
Bankers, meanwhile, complain that investors are becoming too risk-averse in refusing to buy shares based on multiples of EBITDA in 2004.