IPO of Latitude Financial Services

[Isochronous]

Too funny!

 

[cove]

So it was second time unlucky for Latitude getting valued as if it was the perfect lender. The idea that private equity can take over a pretty ordinary type of lender and package it as a must have business failed. It will be interesting what will be said about the attempted float.

 

[RooFlyer]

Well, isn't this interesting (probably pay-walled, sorry):

ASIC probes Latitude IPO plan

Market surveillance experts from the James Shipton-led corporate regulator ASIC have spent Wednesday assessing material relating to the humiliating failed $3.1bn float of the Ahmed Fahour-led Latitude Financial.

Margin Call understands regulatory authorities spent the day combing through the Mike Tilley-chaired financial services group’s market disclosures over the course of the float process.

Of particular interest to Australian Securities and Investments Commission authorities is believed to be the update sent to market participants on Tuesday at lunch time, indicating demand into the underway bookbuild for Latitude shares exceeded supply.

“Demand — comprising early indications of demand and firm orders in the book — currently exceeds the expected offer size, assuming $330m is allocated to retail,” the $1.04bn raising’s joint lead managers UBS, Macquarie and Goldman Sachs told the market about four hours before the bookbuild was set to close.

“The retail networks have been asked to confirm their broker firm allocations over the course of today [Tuesday].”

The market missive prompted several reports that the offer looked like being a success, despite that organisers would within hours pull the already downwardly revised offer after the bookbuild’s 5pm close.

ASIC plays an active role in the market for IPOs as well as other capital raisings, to ensure the market is working properly and that both retail and institutional investors are able to make informed investment decisions.

 

[cove]

I can understand that the vendors would not go under 11 times this years projected earnings in their pricing at $1.78. In today’s low interest rate environment that was about the correct number to use.

 

[RooFlyer]

The Oz has another good story (again, probably paywalled):

How Latitude Financial’s IPO lost its bearings on a day of market drama

In the end it was just too much for the market to swallow.

On Tuesday afternoon, as the clock ticked down to closing time for the biggest share issue of the year, the market fizzed with whispers Latitude Financial’s backers were preparing to pull the offer.

The asking price had already been cut by as much as 20 per cent and investor feedback was that it was still too expensive. At $1.78 a share, it was being offered on a multiple of 11 times earnings and institutional investors wanted that cut further to 10 times.

Earlier that day the three top-tier investment banks managing the float — Macquarie Group, UBS and Goldman Sachs — sent out a message to investors that demand, which included firm orders and also early indications, “currently exceeds the expected offer size” of just over $1bn.

But it included a caveat that demand included $330m — roughly a third of the offer — was allocated to retail and that the networks spruiking the share to mum and dad investors had been asked to confirm their broker firm allocations.

That statement is now being scrutinised by the Australian Securities & Investments Commission as part of a regulation review of the failed share offering.

But as one fund manager put it, investors have now seen the vendors coming. He would have been prepared to buy shares at a market value of $2.5bn before Tuesday’s dramatic events.

“After this debacle, I’m at $2bn,” he told The Australian.

In the back of the vendors’ minds, and prospective buyers’, too, is what might be called the private equity discount. It's a lingering suspicion that private equity sponsors are getting the better end of the deal when they are selling you something. And its fuelled by a handful of prominent duds including the 2009 Myer float from TPG that never recovered its $4.10 issue price and the quick flip of Dick Smith Electronics that went into liquidation two years after being flipped by Anchorage. Estia, iSelect and Inghams are all trading well under their issue price after being sold by private equity sponsors.

Despite lining up 16 brokers and advisers to sell the stock and split about $69m in selling fees, Latitude faced some devastating critiques from fund managers and stock pickers. Atlas Funds Management portfolio manager Hugh Dive wrote that the Latitude offer document reminded him of the prospectus to float RAMS Home Loans: “namely, a financial company built on arbitraging the difference between wholesale and retail interest rates that ultimately depends on the goodwill of banks to continue to lend to them”.

RAMS went bust just weeks after raising $500m from investors as the first wave of the global financial crisis hit in late 2007, earning it the title of the worst float ever.

 

[drron]

It was also pulled in 2018.

Are you ready for the biggest IPO of 2018?

www.nabtrade.com.au

 

[Flying mermaid]

Yes this is their second attempt. Apparently Afterpay had released some research recently rubbishing their cards model. The market was clearly sceptical of their attempts to dress up their BNPL offering. There was also a fair bit of unease over the Insurance division.

most analysts seem to feel there can’t be a third attempt so maybe breaking into bits with trade sales?