Discounted issue prices give IPOs a flying start

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The Independent Online

Britain's struggling market for new issues has produced much better returns than the stock market as a whole, new figures reveal, despite some disappointing performances. Overall, 2010 has proved very difficult for companies seeking to come to market, with high-profile withdrawals such as New Look underlining the concern amongst some issuers about the potential reception for their offers.

Nevertheless, Deloitte's IPO Barometer, released today, shows that, overall, IPOs have posted a good performance. Companies coming to the market this year have produced an average share price gain of 19.5 per cent, well ahead of both the FTSE 100 and FTSE 250 indices, which have returned 3.4 per cent and 7.4 per cent, respectively, over the same period.

John Hammond, capital markets partner at Deloitte, said one reason for the outperformance was probably the difficult climate into which companies had emerged. In many new issues, heavily discounted prices have been a feature, providing investors with a head-start once share trading begins.

The most high-profile success among this year's IPOs has been Supergroup, the company behind the trendy Superdry brand. It floated at 500p in March but its shares had nearly tripled to 1419p on Friday.