Thursday, September 29, 2011 : Weak market conditions cause government to suspend IPO
The Spanish government's green light for taking its national lottery public was switched to red this week as officials suspended the listing due to weak market conditions.
Spain’s Finance Ministry said it postponed the sale of 30 percent of Sociedad Estatal Loterias & Apuestas del Estado SA as market conditions don’t “guarantee revenues that reflect the value” of the operator.
The sale of a chunk of a company with a book value of Euro 20.8 billion was anticipated by the market as one of the biggest in Spanish trading history.
Finance Minister Elena Salgado said that the risk that a weak market presented the possibility of a return less than market valuation was unacceptable, and the listing had therefore been shelved for the present.
Bloomberg business news reports that Spain’s Ibex-35 stock market index has lost 14 percent this year as the nation’s borrowing costs surged to Euro-era records amid increasing expectations of a Greek default that may spread through the region. Axing the deal may increase the amount of debt Spain needs to issue to finance the euro region’s third-largest budget deficit, the publication speculated.
Spain is not the only European nation that has seen public listings temporarily abandoned; at least 24 new stock sales were postponed or canceled in western Europe this year, almost twice as many as a year earlier, according to data compiled by Bloomberg. Investors are shunning IPOs as concerns over burgeoning European sovereign debt push the benchmark Stoxx Europe 600 Index to near its lowest level in two years.