Investors observe the return of the IPO with pockets of activity
Russian companies have raised almost USD 2 billion in the first four months of 2011 through London IPOs, surpassing the total of USD 1.7 billion in 2010. Despite the popularity, the drop out rate has been high with only five Russian companies having listed in London this year. We use securities lending flow to identify which stocks are showing interesting investor sentiment and highlight Yandex along with two other recent floats of interest: Prada and Pandora Media.
European luxury brands, Samsonite International SPA (HKG:1910) and Prada (HKG:1913) are the latest IPO’s on the Hong Kong stock exchange (HIS) with hopes of taking advantage of the taste for luxury in Asia. While the share price of Samsonite, has recovered to close to its IPO price there is little appetite from short sellers. Holdings of long only funds who lend their shares have increased steadily to 8.4% of the Bloomberg free float. Meanwhile, Prada also sees little short interest as the shares continue to surge. Yet, long only investors have built their holdings to an impressive 23% of the Bloomberg free float.
Of the Russian IPOs, only internet service provider, Yandex (NASDAQ:YNDX), which floated on the Nasdaq in May has seen notable securities lending activity. Short interest is just off its high at 5.4% of the Bloomberg free float. Meanwhile, institutional ownership stands at 13.7% of free float.
Internet radio play, Pandora Media (NYSE:P), has seen short interest build to a staggering 21% of the Bloomberg free float. Institutional investors are reasonably enthusiastic and own 1.06% of the shares outstanding.
By way of contrast, we noted in early June that short interest in LinkedIn reached 14% of the free float in the weeks following flotation. It should be noted that demand to borrow following a flotation can be inflated as brokers often borrow shares for liquidity management.
Bottom line:
It is too early to summarize investor sentiment towards these IPOs across multiple sectors. Directional short selling appears prevalent in global internet related IPOs as investors believe these to have come to market on unsustainable multiples. While there is little short interest in the two recent Hong Kong floats, institutional owners appear to be supportive, which bodes well for others planning to float in the region.
