City financiers were given £101 million worth of reasons to be cheerful last week as three companies and their backers raised more than £2.5 billion in flotations.
Worldpay, Hastings Insurance and Equiniti paid out £101.3 million to advisers as they began life as publicly traded businesses in a week that ranks among the top ten for the UK financial markets, according to Thomson Reuters.
Together, the companies raised £2.55 billion, with their backers and executives cashing out £1.21 billion of shares, while the businesses themselves raised a further £1.34 billion to fund their expansion and reduce debt.
The biggest payday came from Worldpay, which handed its advisers fees totalling £50.3 million, as its private equity backers floated the global payment processing business for £4.8 billion, more than twice what it cost them to buy the company from Royal Bank of Scotland five years ago.
Goldman Sachs is likely to have been the biggest beneficiary of the week, taking a leading role as an underwriter on each of the IPOs. In addition, the Wall Street investment bank’s own merchant banking division was one of the biggest winners, with its 72 per cent stake in Hastings quintupling in value in less than two years after the listing set a value on the holding of nearly £800 million.
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“Worldpay’s IPO highlights London’s position as the leading global financial centre able to offer deep pools of high-quality investment capital to global issuers from across all sectors,” John Millar, head of primary markets at London Stock Exchange Group, said.
“This, in turn, allows companies to continue to invest and drive economic growth,”
Shares in Worldpay soared on their first day of trading on Friday, opening 18½p higher than the offer price of 258½p before ending the session at 262p, up by 9.2 per cent.
Hastings did not fare as well and its shares fell below their IPO price on their debut on Monday and closed the week at 168p, 2p less than what investors had paid in the float. Among those stung were six hedge funds, including Marshall Wace, one of the largest London-based funds, which bought more than half the shares sold in the deal.
One senior London-based banker described the listings as “a great run” that came amid a series of downbeat earnings reports from leading banks, including Goldman Sachs and JP Morgan. Despite investment banking advisory revenues of $5.48 billion in the first nine months of the year — the highest since 2008 — Goldman reported a 38 per cent fall in profits and overall revenues far short of market expectations. Like its Wall Street rivals, the main problem was Goldman’s trading division, whose fixed-income, currency and commodities team recorded a 33 per cent year-on-year fall in revenues.
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In Europe, a similar pattern is likely, as Barclays and Deutsche Bank are in the midst of shake-ups of their trading businesses. It emerged yesterday that Colin Fan, co-head of Deutsche Bank’s investment banking division, was leaving the German group, which is one of the biggest employers in the City. Deutsche Bank declined to comment.
Barclays is expected to confirm soon the appointment of Jes Staley, an American investment banker, as its chief executive, but even this seeming commitment to Wall Street and the City is not thought likely to slow the cutbacks in the lender’s investment banking division.
The pressure to cut costs was exposed last week when HSBC imposed a 10 per cent salary cut on hundreds of contractors working for its global banking and markets business, as well as a two-week enforced holiday.