Morse puts IPO on backburner

Morse Group, the leading UK Sun reseller, has blamed unfavourable market conditions for shelving its £600 million flotation plans this year, according to yesterday's Sunday Times.

The company will attempt an IPO next year, the newspaper says. Morse has never announced publicly its intention to float, but the Sunday Times usually has a good handle on this sort of information.

We have noted elsewhere our difficulty in understanding how a £600 million price tag could be attached to Morse But it is equally difficult to see how the -– admittedly very profitable -- company could get away a £600 million IPO next year.

Right now, computer reseller and distribution stocks are out of favour with UK investors –- Computacenter's May IPO, for example, opened trading today at 475p, against the near 900p per share it hit in the heady days after flotation.

Morse suffers too because it is a small cap company (with designs on medium cap status). And UK market sentiment has turned against small and medium caps since the Sunday Times broke the news of Morse’s float plans in June.

The last three months have been "the quietest for new issues for over a decade", according to the Daily Mail. It quotes KPMG Corporate Finance who says it is now "almost impossible to float small businesses".

Neil Austin, head of new issues at KPMG, told the paper: "The tap turned of at the end of the July. It could be several months before we are out of the doldrums." ®