Jason Nissé: New issues will find that there ain't no cure for the summertime blues

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The Independent Online

"One bad apple don't spoil the whole bunch, girl", sang the Jackson 5. And these wise words could have no better echo than what has been going on in the nervous new issues market.

"One bad apple don't spoil the whole bunch, girl", sang the Jackson 5. And these wise words could have no better echo than what has been going on in the nervous new issues market.

The apple that has upset the cart, as it were, is HMV, whose market debut last week was as well received as the worm that crawls out of a badly kept Braeburn.

HMV is a company riddled with inconsistencies. The music retailing arm is staring at a declining market where online piracy is eating into profits all over the world (but has not hit the UK hard, as yet). The bookselling business has a large number of expensively acquired and expensive-to-run stores, facing competition on one side from more nimble chains such as Borders and on the other from Amazon, one of the few truly great internet brands.

EMI is desperate to offload the company, and the venture capital investors have other fish to fry. No wonder the issue bombed.

This week, though, we are being offered a juicy Granny Smith of an issue in Punch Taverns, the pub company run by the charming tycoon Hugh Osmond. But will it be firm, green and tasty or a bitter disappointment?

Punch is a well-established business. As we wrote a few weeks ago, the watering-hole sector has been through all sorts of corporate shenanigans, but is now consolidating around a handful of professional bar owners. Punch is nothing if not professional. The sector is solid, if not necessarily that exciting.

The HMV effect was bearing down on Punch last week, but on Friday the "grey market" (the unofficial trading before the float) was boosted by some concerted buying.

As trading is thin, it is quite easy to manipulate the price. Still, Punch should pack one when it floats this week.

Will this give confidence to the new issues market? Well, in posh clothes land they will be hoping so. Prada is expected to announce a €1.5bn (£930m) listing (and it needs the money to bring its debts down) and GUS wants to float Burberry, but one fears that this business is rather more Plaistow than Place Vendôme these days. And with Yell giving the market a £3bn bell shortly afterwards, not to mention William Hill, Focus Wickes and Homebase, it could be an active summer.

Does this mean market confidence? I wonder. There is a bit of bid activity, though both the GMG bid for Jazz FM and the easyJet talks with Go involve investors trying to get out of a situation. There is a little belief in the equity market, but it is fragile.

If you are thinking of floating, I'd wait. In the words of Earth, Wind and Fire, you could be "dancing in September".

Pay setters slow on the uptake

September will also be the time when we might expect the new, improved Prudential executive compensation scheme. I like Sir David Barnes and I find it hard to believe that the AstraZeneca architect could have made such a mess in his role as chairman of the Pru remuneration committee, or that the country's largest investor was so insensitive to shareholders' feelings as to have allowed such a stupid situation to occur. This is the second time the Pru has come a cropper with its compensation schemes – and you have to wonder whether it is a sign of arrogance.

After all, the insurer was horribly slow to react to concerns about its chairman, Sir Roger Hurn, in the wake of the Marconi debacle. Sir Roger is a lame duck at the moment. He actually should have resigned but the Pru seems unable to name his successor. Maybe David Clementi is having second thoughts.

The Pru's fund managers have historically been tough on corporate governance issues, but they will now be finding it difficult to take the lead when tackling tough situations. Schroders, which was an opponent of the Pru pay deal, faces questions about the age and independence of its directors, while Selfridges' share option scheme is the latest target of the nay sayers.

But the most interesting battle could be next month, when Vodafone tries to gain approval for a new incentive scheme. The mobile phone group's relationship with the market makes the Pru's look good. It will want to offer Sir Christopher Gent a good package to stay – yet some investors, seeing the collapse in value at Vodafone, are wondering whether it is worth the bother.

j.nisse@independent.co.uk

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