Limited interest in Swiss IPOs

Esmertec makes software for mobile phones Keystone

The SWX Swiss Exchange has seen more initial public offerings this year than last, but while some recent flotations have gone smoothly, others have experienced weak demand, been pulled, or delayed.

Esmertec, a developer of software for mobile phones, was supposed to float on the SWX last week, but has postponed the move indefinitely.

Esmertec’s first postponed its market launch in order to inform subscribers about a patent claim initiated by British rival, Tao Group of Reading.

A few days later, Esmertec said the bankruptcy of a client meant that now was not the optimum time to flot on the SWX.

The reasons for the delay are quite different from that of another Swiss firm, Speedel Pharma. It pulled its plans to raised capital on the Swiss public market in May.

The biopharmaceutical company delayed its flotation indefinitely after a short bookbuilding period revealed investors were not prepared to pay the price it wanted for its shares.

That turn of events followed closely on the heels of the faltering IPO of biopharmaceutical company, Arpida, whose share price fell dramatically on its first day at the bourse in high volume trading. The firm’s share price has climbed again in recent weeks but is still slightly under its issue price.

Strong market

This is all happening amid the strongest market for IPOs in five years. European firms have so far this year raised more money than in any year since 2000, according to Dealogic, a financial data vendor.

“Institutional investors have an appetite for risk and there is liquidity for technology IPOs,” commented Bertrand Merkli, head of Trading & Advisory at the Neue Aargauer Bank.

In Merkli’s opinion, the postponed IPOs have more to do with the specific circumstances of the companies involved than the market.

Looking forward, Merkli says the market for IPOs will remain strong but “limited”. He does not expect to see a return to the volume seen during technology speculation bubble.

Observing the activity this year, it seems that while institutional investors have capital to invest, they are driving a hard bargain, especially in the bookbuilding period.

Patent issue

It is an observation borne out by the comment of at least one analyst regarding Esmertec’s decision to delay.

Panagiotis Spiliopulos, a technology analyst at Bank Vontobel, suggested in a telephone interview with Swiss Venture that the patent issue would probably put a downward pressure on the firm’s share price and demand for its “book”.

Before the announcement Esmertec had actually been successful at selling its shares at the high end of its bookbuilding range.

It reported that demand exceeded supply by nine times, but it said in the same statement, that it wanted to take the time to provide information to subscribers about the rival firm’s patent claims.

A spokeswoman for the firm said that Esmertec did not want to surprise with the news anyone after going public.

Valerie Thompson