Aston Martin Is the Latest IPO to Flop in London

(Bloomberg) -- Whether it’s Brexit, the outlook for higher rates or just opportunistic companies trying to raise a bit too much money, IPOs are flopping in London.

Aston Martin Lagonda Global Holdings Plc, the maker of James Bond’s sports car, became the second company in less than a week to receive a lukewarm reception for its initial public offering. It sank more than 7 percent Wednesday in its first day of trading. Funding Circle Holdings Plc, seen as a bellwether for London’s hot fintech scene, has only been trading for four days, but is already down 13 percent.

“I’d like to own the car but not the shares -- it was too hyped, and the same is true for Funding Circle,” said Nick Burchett, a U.K. equities manager at Cavendish Asset Management. “These IPOs have probably put a lid on future deals for the moment given investors’ burnt fingers.”

Aston Martin’s IPO valuation was 20.7 times first-half earnings, close to the current share multiple of 21 times expected 2018 profit for Ferrari NV, which is more profitable and has a stronger balance sheet. Priced at 1,900 pence, the stock was down to 1,769.4 pence at 12:30 p.m. in London.

Funding Circle, an eight-year-old provider of online loans that started as a peer-to-peer lender, priced its IPO at 440 pence and is now below 390 pence. It plunged 17 percent on Tuesday. The London-based company is unprofitable, plowing its rapidly growing revenue into equally rapid expansion plans.

“The secondary market in the U.K. and Europe has been a bit soggy all year thanks to macro-political concerns, including Brexit and the clear rise in rates globally, so companies coming in the current IPO surge need to be priced to go or they will struggle,” said Ian Ormiston, an equity fund manager at Merian Global Investors in London.

“The weird psychology of new issues is that deals that don’t price towards the top of their ranges are viewed as damaged and often then trade weak, for at least the immediate aftermarket,” Ormiston said.

©2018 Bloomberg L.P.