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Issuers look to the pink herring solution

A recent example from Germany suggests that timing can be crucial when it comes to pricing an IPO – later works better apparently. Listening to investors offers a way of avoiding embarrassing repricings. Peter Koh reports.

Share price and volume

INVESTOR APPETITE FOR new issues is strong but selectivity means that price is a highly sensitive subject. Block trades are still being priced poorly, with expensive consequences for over-eager banks, but mispriced IPOs could become an endangered species in Europe thanks to a simple change in the process pioneered in Germany that is almost too basic to be called an innovation. The German IPO market has been notoriously difficult since the dot com bubble burst and it has only been 12 months since German semiconductor makers X-Fab and Siltronic embarrassingly failed to get their IPOs off the ground. This March, however, Conergy, a German solar power equipment maker with a market capitalization of e540 million, found that its IPO was 29 times oversubscribed. This compares with a first-quarter average oversubscription rate of 9.3 times, according to SG. The mid-sized deal, which raised e243 million, priced at the very top of its bookbuilding range. It also attracted an unprecedented level of retail demand. Retail investors ordered e1 billion-worth of shares and in the end got 18% of the deal.

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