Poundland Group Plc shares soared as much as 22 percent above their offer price on the first day of trading as investors sought to buy into the growth prospects of the discount retailer partly owned by Warburg Pincus LLC.
The stock rose as high as 366.75 pence in London, compared with the offer price of 300 pence, valuing the retailer at more than 900 million pounds ($1.5 billion). The company expected to raise as much as 431 million pounds including an over-allotment option for the sale managers.
“They are in a massive sweet spot of retailing, as there’s a huge flight toward discounters in general across the entire demographic spectrum,” said Bryan Roberts, an analyst at Kantar Retail in London. “They’re very far away from hitting a ceiling in the U.K. and if you factor in overseas and online expansion, there’s lots of upside left.”
Poundland, which operates more than 500 stores in the U.K. and Ireland, sold shares in a U.K. market that is increasingly polarized in shopping habits toward bargain and upscale stores. Discount food retailer Aldi’s growth accelerated to a record in the last 12 weeks, Kantar Worldpanel data showed yesterday, as more Britons sought lower prices, ratcheting up the pressure on domestic market leader Tesco Plc.
Separately, Pets at Home Ltd., a chain of animal-care shops across the U.K., today fell as much as 8.1 percent below its offer price of 245 pence in its first day of trading.
Poundland traded at 366 pence as of 10:33 a.m., giving the company a market value of 915 million pounds. Pets at Home was down 0.6 percent at 243.50 pence, for a value of 1.2 billion pounds.
Including today’s sales, IPOs in London have raised about $5 billion this year, seven times the total in the same period in 2013, as investors return to the U.K. market, according to data compiled by Bloomberg. The FTSE 350 General Retailers Index has advanced about 11 percent this year, more than triple the gains of the FTSE 250 Index as investors bet on an economic recovery in the U.K.
Retailers have seized the opportunity to list in London this year after a five-year lull for the industry in the wake of the economic slowdown. Pets at Home and Poundland follow appliances retailer AO World Plc, which last month surged on its first trading day and is now valued at about 1.5 billion pounds.
“The combination of a track record of delivering strong, profitable growth underpinned by a well-invested infrastructure and a compelling growth story has attracted overwhelming support for Poundland’s initial public offering,” Chief Executive Officer Jim McCarthy said in a statement today.
JPMorgan Chase & Co. and Credit Suisse Group AG are among banks managing the Poundland sale. Bank of America Corp., Goldman Sachs Group Inc., KKR Capital Markets Ltd. and Nomura Holdings Inc. are managing the Pets at Home IPO.