The recent drought in European secondary share sales ended on Thursday night with a rash of surprise deals. They haven't fared well.
Broadcaster ProSiebenSat.1 Media SE has sold new shares raising 515 million euros ($572 million) in a placing to fund unspecified acquisitions. The private equity backers of DFS sold 62 million pounds of stock in the British furniture store. Two big investors in Corticeira Amorim SA raised 105 million euros selling 10 percent of the cork specialist. Buyout firm KKR sold 10 percent of flooring business Tarkett SA, raising 196 million euros. And a large shareholder in Russian retailer Magnit PJSC is offering a 1.3 percent stake for sale.
This has been a poor week in equities because of the mounting uncertainty about the outcome of the U.S. election, and the market hasn't taken the placings well. ProSieben shares are under the placing price and 7 percent lower than their last close. It's not clear if book runners Goldman Sachs and Unicredit underwrote the deal and are still sitting on stock, but the German broadcaster says it has the funds.
DFS shares fell below the level of the share placing, trading 10 percent down from Thursday's close. While shares in Corticeira and Tarkett are above their placing price, the deals have still left the shares down 7 and 5 percent down respectively. Magnit's London GDRs are down about 4 percent.
Discounts on secondary deals in Europe were just over 4 percent in September, according to Bloomberg data. This rose to just under 6 percent in October, when stock markets started to adjust for the likelihood of a U.S. rate rise. But the DFS deal was done at a striking 9 percent discount.
It's not hard to see why these issuers decided to brave fragile markets. Volatility may only get worse next week with the U.S. poll, shutting the market for placings altogether.
Thursday may prove to have been the last open window. Of course, September would have been a better time to raise funds but issuers sometimes have no choice over the timing of secondary sales as they may be bound by lock-ups imposed at IPO.
The dearth of placings will put pressure on banks to make promises to sellers to underwrite shares sales at brave prices. That may prove costly if they can't then find buyers for all the stock in these tricky markets.
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