With investor confidence shaken by another day of turbulence in the stock market, it is becoming increasingly likely the float will be pulled.
Asked whether the market's gyrations would scupper the float, one leading City fund manager said: "I think it might well do. I get the strong feeling they are in serious trouble."
One supermarket analyst added: "Everything that could have gone wrong has. If it's only one-third subscribed at this stage, it's a disaster."
The company did not comment, and was understood to be in meetings with its merchant bank advisers, Kleinwort Benson. The flotation offer is not underwritten.
With investors leaving decisions until the last minute because of difficult market conditions, Somerfield's broker, NatWest Securities, has been frantically wooing smaller fund managers.
There was also speculation yesterday that NatWest has been contacting some of Somerfield's debt holders suggesting they should buy shares to help the float. This would involve debt holders effectively swapping debt for equity in the company.
It is known that debt holders have been phoning NatWest "aggressively" to ask about the status of the float.
NatWest would not confirm the rumours. It also declined to confirm that the issue was only 30 per cent subscribed.
Some analysts are suggesting that if Somerfield's float is pulled the company could find it difficult to compete in an increasingly cut-throat market.
It would also be a big financial blow to the board of directors, which is set to share bonuses of pounds 10m from the float. Chief executive David Simons is in line to pick up almost pounds 4m.
Another analyst suggested that without proceeds from a flotation Somerfield would find it harder to honour a pounds 30m debt repayment due to its parent Isosceles in October.
Analysts said there are only a few potential buyers for the company. Kwik Save is performing poorly and Iceland issued a profits warning last week. Continental buyers such as Aldi are not expected to be interested.
The flotation of the former Gateway business, with its weak brand name and high debts, and in the cut-throat supermarket sector, was always going to be a struggle. But the issue has been dogged by misfortune. Somerfield ran into an increasingly difficult new issues market, then had to cut the price of its shares from 180-190p to 160p last week following Iceland's warning.
The company's worst fears, that the stock market would head south this week, have been realised.
One fund manager said: "At 160p I wouldn't say the price is far from being unreasonable. But given market conditions you really have to wonder. You almost feel sorry for them."Reuse content