Markets around the world fell yesterday as investors continued to sell off technology stocks.
Wall Street continued to dump shares in the likes of Google and Amazon, while in London blue-chip stocks such as the microchip designer Arm Holdings and enterprise software provider Sage both fell. It marks a week of losses driven by anti-technology sentiment, with only a brief respite on Wednesday.
Facebook, Google and Amazon have all reached fresh highs this year, but many investors are looking to cash out ahead of earning reports. Google and IBM will kick off the reporting season for US technology next week when both report earnings on Wednesday.
Jasper Lawler, a market analyst at CMC Markets, said: “They’re almost a victim of their own success. You get into that new high territory with share prices and you start assessing what’s in your portfolio – you look at the earnings season coming up, you look at valuations and you think let me reconsider my holdings here.”
There have been concerns in the UK that the rash of technology companies that have come to market in recent months have also been listed at unrealistic valuations, leaving investors with losses. The online white goods retailer AO World, the web takeaway firm Just Eat and the ecommerce firm Boohoo are all trading below their float prices.
Mr Lawler said: “Even if it wasn’t wrong for them to list at this time, maybe the pricing was a bit lofty. Just Eat was priced at 100 times earnings, whereas Domino’s Pizza was 20 times earnings and a far more solid, reputable company with a lot more assets. It was getting a bit bubble-like.”
There are fears that the wider market for initial public offerings could also be running into trouble, with two newly floated companies meeting with a muted response yesterday. The specialist care provider Cambian fell 16p to 209p as it began conditional trading in London, despite the fact that shares were priced at the lowest end of its expected 225p-290p range.
The laboratory tester Exova also failed to elicit much interest from investors, adding just a penny to its 220p offer price. Only the plastic pipe maker Polypipe managed some success with its return to market yesterday, adding a healthy per cent to end at 260.25p, up 15.25p.
The number of companies going public is at its highest level since 2007, with the amount of money raised from initial public offerings across Europe in the first quarter amounting to more than the previous four years combined, according to data from PwC.
Many of the companies currently listing are private equity-backed businesses, with investors taking the opportunity to cash out while the IPO market is buoyant. But there are signs that this buoyancy is fading.