The email from BlackRock comes as hedge funds have been ramping up their short positions in a number of recent private equity-backed listings including Pets at Home, Saga and Just Eat in the UK, according to regulatory filings. By shorting a stock, hedge fund managers are betting that it will fall in value.
BlackRock said that a "worrying feature" that was cropping up more frequently was "the failure of companies to achieve stated financial and business targets even after one or two quarters. Any thoughts on the lack of conservatism of projections or ability to diligence these targets also gladly received."
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Mr Leach told the Financial Times that the sheer volume of IPOs coming to market this year had affected communication between issuers and investors: "There has not been the same level of thoughtfulness and dialogue on valuation and structure."
BlackRock tracked 104 IPOs in Europe in the first six months of this year, of which 38 deals – just over a third – are trading below their issue price. The Eurostoxx index is down around 0.5 per cent so far this year. Twenty companies which had been planning to go public – including names such as retail chain Fat Face – pulled their flotations. This year €33.7bn has already been raised in the European IPO market, more than in any full year since 2007, according to PwC.
Some of the worst performing IPOs in Europe have been those brought to market by private equity investors, with eDreams Odigeo, backed by Permira and Ardian, and Applus, the Carlyle-backed inspection group, both issuing profit warnings soon after listing. Many private equity groups use independent advisory firms such as STJ Advisors, which investment bankers say are too aggressive on pricing.
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