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Hedge funds to favour BRIC not PIIGS in 2010

posted Jan 15, 2010, 9:06 AM by Stacey Riggs

ZURICH, Jan 15 (Reuters) - The fast-growing BRIC group of economies will be back in favour in 2010 among emerging markets-focused hedge fund managers, who may shun European countries slammed by recession, an industry expert said. While strong growth is expected in Brazil, Russia, India and China, the European Commission expects the fiscal position of so-called PIIGS -- Portugal, Ireland, Italy, Greece and Spain -- to worsen even further in 2010.

"Concerns about absorption of new government bond issues will affect the intermediate-to-long sector of the yield curve in those countries," Lipper hedge fund research head Aureliano Gentilini told Reuters on Friday.

"Rating agencies will downgrade further the credit rating of PIIGS countries."

New Lipper research said India-focused investors will be the cornerstone of net sales in the Asian region in 2010, with hedge funds focused on emerging markets strategies accounting for a large portion of capital inflows.

China and Brazil are also expected to see strong inflows, although these may be less significant in Russia where political and governance issues remain worrying for asset managers.

The research says single manager hedge funds will see about $100 billion in new money in 2010 after two consecutive years of outflows. Average single fund returns of 10 percent will propel assets to $1.86 trillion by the end of the year, Lipper said.

PwC: European IPO market up in Q4

posted Jan 10, 2010, 5:40 PM by Yale ReiSoleil   [ updated Jan 11, 2010, 12:12 PM ]

Europe’s IPO markets recorded a distinct upturn in activity in the fourth quarter (October to December) of 2009, with both value and volume rising markedly over the previous nine months when stock exchanges continued to suffer from the worldwide loss of confidence in the capital markets and the recession. However, pricing proved difficult in what remains a buyer's market, according to the latest IPO Watch Europe, the PricewaterhouseCoopers survey tracking the volume and value of IPOs around Europe.

There were 61 IPOs on European exchanges in the last quarter of 2009 with an offering value of €4,994m, compared with 44 listings that raised €1,375m in the previous quarter and the 64 IPOs with a value of €1,238m that were recorded in the final three months of 2008. 

NYSE Euronext led on IPO value with 13 IPOs raising €1,907m (in the same quarter of 2008, it had an equal number of IPOs but they raised just €6m) followed by the Warsaw Stock Exchange (WSE) with 16 IPOs valued at €1,454m (compared to 23 lPOs a year ago, raising €555m). London was in an unaccustomed third place with 14 listings raising €951m (two more than in Q4 2008 with a value of €666m). Nine of the London IPOs were on its AIM market and raised €388m, the same number it saw in Q4 2008 with a total value then of just €3m. The remaining listings were on the Main Market and raised €563m. 

Warsaw recorded the biggest IPO of the quarter, the Polish energy company, Polska Grupa Energetyczna which raised €1,407m, followed by the Dutch insurance company Delta Lloyd which listed on NYSE Euronext and raised €1,016m. The third largest, also on NYSE Euronext, was the French industrial goods company CFAO, which raised €806m, while London hosted the fourth biggest IPO, that of investment company Gartmore Group, raising €378m. 

Richard Weaver, partner, Capital Markets Group, PwC, commented: “After more than a year of being effectively closed, Europe’s IPO markets are showing clear signs of opening for business again, although pricing pressures remain in what is very much a buyer’s market as institutional investors strike a hard bargain. The fourth quarter was the best three months for the IPO market in terms of offering value for more than a year and with market indices generally ending 2009 on a high note, it should bode well for the coming year.” 

Elsewhere in Europe Luxembourg saw eight IPOs with a combined value of €456m, a huge improvement on a year ago when it hosted four IPOs which raised no money, although it was well down on the third quarter of 2009 when it hosted seven that raised €817m. 

Borsa Italiana enjoyed an improved quarter compared to the fourth quarter of 2008 with three IPOs raising €121m (none a year ago), while the Deutsche Börse hosted just one IPO valued at €48m (in Q4 2008 its solitary IPO raised no money). NASDAQ OMX saw three IPOs raising €38m (nine raising no money a year ago). 

The BME (Spanish Exchanges) hosted one IPO worth €12m (compared with none in Q4 2008) as did the Oslo Børs and Axess, raising €7m (compared to two in Q4 2008 raising €11m). The SIX Swiss Exchange saw one IPO but this raised no money while the Athens exchange, the Wiener Börse and the ISE again had no IPOs this quarter. 

Tom Troubridge, head of the Capital Markets Group, PwC, added: “With markets opening up and a pipeline of listings in place, we stick to our previous forecast that European IPO markets will recover during the first half of this year, barring any major, unexpected financial shocks. Around the world, we expect Greater China to enjoy another strong year, building on its market-leading role in 2009, and the US is also expected to perform well. Europe as a whole is lagging in the race to exit the global recession and this is likely to be reflected in the slower recovery in its IPO activity, with political uncertainty in the UK also likely to act as a dampener in the near term on both domestic and international listings in London.” 

For 2009 as a whole, NYSE Euronext also ended the year in first place by value with 36 IPOs raising a total of €1,908m. London was in second place with 25 listings raising €1,660m and the WSE finished in third place, hosting 38 IPOs with an offering value of €1,594m. Overall Europe saw 151 IPOs with a combined offering value of €6,834m, still less than half the 337 listings in 2008 which raised €13,957m. 

United States
The US markets showed considerable recovery in the fourth quarter, with 34 IPOs accounting for €11,476m in value, a dramatic increase over the same quarter of 2008 when just three were recorded, raising a mere €189m. It was also well up on the 20 listings the markets saw in the third quarter of 2009 which raised €4,016m. 

For 2009 as a whole, the US exchanges saw 68 IPOs raising €17,212m, putting the US markets in second place behind China (mainland and Hong Kong) but ahead of Europe. This compares to 57 IPOs in 2008 which raised a total of €19,092m and which included the Visa Inc IPO in the first quarter of 2008 on the NYSE which raised €11,510m. 

China (mainland and Hong Kong)
China claimed the top place by offering value in 2009 with 172 IPOs raising €42,265m, well ahead of both the US and Europe. Hong Kong hosted 73 IPOs in 2009 raising €22,542m, compared to 49 IPOs in 2008 worth €5,760m. In mainland China (Shanghai and Shenzhen stock exchanges) there were 99 IPOs during the year raising a total of €19,723m, compared to 77 IPOs with a combined value of €10,115m in 2008.

Venture Capital Trusts: Tax Breaks But Risk Hikes

posted Jan 9, 2010, 11:20 PM by Scott Smith   [ updated Jan 11, 2010, 12:22 PM by Yale ReiSoleil ]

London (Thomson Reuters) -- Despite the Christmas excess, UK investors are developing a ferocious appetite for venture capital trusts. Recent months have seen British investors hungrily moving out of pension schemes and into venture capital trusts in an attempt to maximise their tax relief. These moves are prompted by the latest present to come out of the UK government’s Pre-Budget Report – a reduction on the tax relief available to pension investors. But not all Christmas tidings are positive for venture capital trusts. The new changes to venture capital trusts in the Pre-Budget Report could make these trusts a riskier investment in the future.

VCTs are interesting (and we’ll give you a quick primer on them below), but they’re even more interesting as they are now in flux.  VCTs benefit from a unique tax treatment in the UK, even more so than pension plans, due in part to the social utility they have supported in recent years by providing small and medium sized businesses with valuable capital. But times are hard for small companies and their shareholders (including VCTs), and new government regulations will make things even harder for them. VCTs in particular face a slew of challenges related to tax benefit restrictions, buy-back provisions, and regulatory changes.

Primer on VCTs

A venture capital trust is a highly tax efficient, closed-end collective investment scheme designed to promote private equity for small and expanding companies. They are quoted on the London Stock Exchange and are similar to investment trusts, with an active manager and a spread of investments.

The UK VCT scheme was started on 6 April 1995 by the Finance Act 1995 to encourage venture capital investment in small expanding companies. Despite their name, VCTs are actually public companies that are listed on the London Stock Exchange, comparable to business development companies in the United States. VCTs create portfolios of investments in a number of smaller high risk trading companies, whose shares are not listed on a recognised stock exchange. According to Downing Absolute Income 2 VCT in its recent IPO, approximately £3.5 billion has been raised by over 100 VCTs since their inception.

There are broadly speaking four different types of venture capital trusts, namely; AIM, generalist, specialist and hybrid VCTs. AIM venture capital trusts invest in companies that are listed on the Alternative Investment Market (AIM) of the London Stock Exchange. Generalist VCTs invest in non-AIM companies and give money for company growth and management buyouts. Specialist VCTs focus on particular industry sectors, whilst Hybrid VCTs have a flexible approach to investment and consider applications for funding from all qualifying companies.

Startup Corporate Finance


VCTs play an important role in providing venture capital to small start-up companies. VCTs are essentially funds, in which investors take an equity stake, similar to a real estate investment trust. Unlike their cousins, venture capital firms, VCTs do not generally get involved in the management of companies but provide a means by which investors can gain exposure to smaller untraded companies. Venture capital trusts are run by fund managers who are usually members of a larger investment group. The fund managers choose which companies to invest in depending on the VCTs investment criteria. The VCT will then take equity and debt stakes in small unlisted companies.

A company must be awarded VCT status from HM Revenue & Customs (HMRC) in order to qualify for the requisite tax relief. As part of its VCT status, the HMRC stipulates that VCTs may only invest in companies that:
  1. Are unquoted – i.e. have not listed either debt, shares, stocks or other securities (except for AIM and OFEX listed companies);
  2. Are carrying on a qualifying trade- most trades qualify but the following are excluded; dealing in land, financial activities, leasing or letting assets, receiving royalties or licence fees, farming, forestry, hotels, providing services to another company where the company’s trade consists of an excluded activity;
  3. Have gross assets that do not exceed £7 million;
  4. Are independent- ie not controlled by another company.
All of this has elevated VCTs to a particularly important role in funding small startups in recent years.

A Period of Flux


The last 18 months, however, have been a period of flux for VCTs, however, which have investment strategies that are heavily reliant on the success of small unlisted companies. Small companies have been badly hit by the recession, as they have been starved of credit from banks and larger companies. This in turn has affected VCTs, as their investments have gone bad or have reduced in value.

VCTs have also been hit by falls in stock markets. In particular, AIM venture capital trusts have suffered significant falls in net asset values, as the AIM markets were hit hard by the recession -- Baronsmead AIM, an AIM Venture Capital Trust, announced a loss of 43% on opening values in the first quarter of this year.

Falls in stock markets also hit the ability of VCTs to raise funds, with VCTs collectively raising £290 million in the tax year 2007/8 but only managing to raise £135 million in the last tax year. In recent months though, things have looked a little better for venture capital trusts. In fact, VCTs have become the retirement plan of choice for many high earners, as tax relief on pensions gets increasingly squeezed by the UK government. The generous income tax relief of 30% for all investments up to £200,000 in VCTs means that many high earners are better off investing in venture capital trusts than in pension plans.

Why Invest in a VCT?


VCTs are attractive to investors because of the tax relief they carry. Investors may subscribe for up to £200,000 new shares per tax year and receive income tax relief at the rate of 30% on the amount invested, if the shares are held for at least five years. A disposal of shares in a VCT is also exempt from capital gains tax and dividend payments are exempt from income tax.

The favourable tax treatment that VCTs attract makes them appealing to many investors, especially when compared to pension plans. Although pension plans benefit from an upfront tax relief of 40%, payments out of pension plans are subject to tax at 20% (assuming the individual is a basic rate tax payer). The result is that many high earners are better off investing in VCTs than in pension plans.

For example, say you contributed £10,200 to a VCT. This would be worth £14,571 after 30% tax relief. Invested over 25 years with 4% growth, the pot would be worth £631,095, producing a tax free income of £31,553 a year (assuming a dividend yield of 5%).

Alternatively, you could put your £10,200 into a pension, where it would be grossed up to £17,000 with 40% tax relief. This would be worth £736,299 after 25 years at 4% growth, giving an income of £36,814 (assuming a 5% yield). However, this income is subject to tax at 20% as a basic rate tax payer, reducing your take home pay to £29,451 a year -- £2,102 less than with the VCT.

Limited Tax Relief


VCTs have, however, suffered from an inherent problem: that income tax relief of 30% is only available to those investors who subscribe for new shares in a VCT. Those investors who acquire second hand shares in a VCT (i.e. on a secondary market) are not able to claim tax relief, although they may still benefit from tax free dividends and capital gains. This means that investing for new shares in a VCT is much more attractive than acquiring the shares in a secondary market. This has resulted traditionally in a restricted market for second hand VCT shares, which makes VCT shares highly illiquid.

New Market Developments: Buy-Backs

In an attempt to make VCT shares more liquid, many VCTs, such as Octopus Vct Plc, Proven Growth and Income and Ingenious Entertainment Vct 2 Plc, have recently announced plans to introduce buy-back provisions.

A buy-back scheme allows a VCT to purchase shares from investors at a discount to their face value, should an investor wish to sell their shares in the VCT. This obviates the need for a secondary market as an investor will be able to sell back their shares to the VCT should they be unable to find a secondary market buyer.

So far so simple, but corporate governance in the UK provides a further problem. Capital maintenance requirements state that a company may only buy-back its own shares out of its distributable reserves (realised profits less its accumulated, realised losses). This means that VCTs may only purchase its own shares so far as it has realised profits that exceed its realised losses. Ingenious Entertainment VCT announced a particularly ingenious solution to this problem in its recent open offer this year. By applying to court to cancel its share premium account, Ingenious Entertainment will be able to create a special capital reserve to finance share buy-backs. By effectively re-designating its share premium account as a buy-back capital reserve, Ingenious will be able to create a pool of cash to fund buy-backs without recourse to its distributable profits.

Many VCTs have followed Ingenious Entertainment’s lead, including: Downing Absolute Income VCT, Octopus Secure Venture VCT and Proven VCT. Proven VCT even upped the stakes recently by promising to buy back shares from investors at a discount of no more than 5% of the net asset value per share. Recent volatility has even lead some VCTs, such as Acuity VCT, to announce the suspension of share buy-back policies in an attempt to stop its financial hemorrhaging, as investors sort to liquefy their investments. But as the financial markets bounce back VCTs are once again proposing buy-back programmes to make themselves more attractive to investors.

Regulatory Challenges


Venture capital trusts may also benefit from some further bad news for pension funds in the Pre-Budget Report. Earlier this month the Chancellor of the Exchequer announced the introduction of a 50% tax rate for those earning more than £150,000 a year earlier this month. In conjunction with the new tax band, there will be a cut in the rate of tax relief on pension contributions to 20% for those earning £180,000 or more, from April 2011. Compared to a 30% tax relief on VCT investments up to £200,000, VCTs suddenly look very attractive to investors.

But there is a sting in the tale for VCTs as well. Under the new proposals, VCTs will have to hold larger equity stakes in the companies they invest in. Under section 842AA Taxes Act 1988 (as modified by the Finance Act 1995) at least 70% of the value of a VCT’s investments must be invested in qualifying companies within three years. Prior to the Pre-Budget Report, only 30% of this had to be in equities, the remainder could be in debt. But starting from April 2010, a VCT must invest 70% of its funds in company shares.

Investing in debt rather than equity puts a VCT in a better position in the event of an insolvency. Debt can be secured against assets and will rank in priority to any equity stake held in a company. By requiring VCTs to invest more heavily in equity, the UK Government is effectively reducing the likelihood that VCTs will be able to recover capital in the event of an insolvency of one of the companies it invests in.

The new rules are not retrospective, so VCTs that have already been set up under the old ratios can continue to receive investments. But all new VCTs will have to take the added risk of investing more heavily in equity.

The effect of the new rules may be to create two tiers of VCTs, with those that were created before April 2010 able to reduce risk in investments by taking debt as well as equity and those that are created after April 2010 only able to make equity investments. This may mean that those VCTs today are more attractive than their future offspring.

With the favourable tax treatment of VCTs when contrasted with pension plans, and a potential deadline of April 2010 for the safest investments, it isn’t difficult to see why many investors are piling into VCTs while they still can. This will be good news for many small and medium sized UK companies, which may seek to tap a valuable source of funding from VCTs in the near future.

Happy flotation year beckons in London

posted Jan 3, 2010, 8:58 PM by Scott Smith

Commentary: High hopes for initial public offerings after 15-year low in 2009

LONDON (MarketWatch) -- Springtime seems to have come early to the London stock market. Nothing to do with the weather. Ever since the Copenhagen summit on global warming, snow has been on the ground in unusually deep patches across the UK. In some cases stockbrokers will be struggling back to work through snowdrifts Monday clad in Wellington boots rather than brogues.

Neither is the City buoyancy simply a reflection of the end-year rally around the world. Hopes are high of a substantial revival in City flotations this year -- and the fees that flow in their wake -- after a decline to a 15-year-low in 2009. The last couple of years have seen substantial collective beating of City breasts as the London market reacts to accusations that an over-light touch in U.K. financial regulation may have contributed to the financial crisis.

 
International Forecast for 2010

Mike Lenhoff, chief strategist of Brewin Dolphin in London, runs down what to expect in China, Europe and the U.S. as 2010 gets underway.

At one point, this caused significant tension between New York and London. The two sides of the pond swapped invective over whether an overly lax City regime that attracted large numbers of foreign issuers in London was promoting loose practices around the globe. The junior investment market for smaller companies, Aim, was singled out for particular criticism. The Americans were up in arms not just about a surge in issues in London Russian and Chinese companies but also, a lot closer to home, about the roughly 30 US companies that listed on Aim in 2006 and the early part of 2007.

The total number of initial public offerings on the main London market in the past year fell to nine, raising less than 1 billion pounds, the lowest for more than 15 years. However, hopes are high that 2010 will be a great deal better. In December, fund manager Gartmore Group Ltd. (UK:GRT 214.50, +1.50, +0.70%)  became the first large IPO of the year.

The 2010 lineup

Companies lined up for IPOs in 2010 are all from sectors that have fared relatively well over the past 12 months - including New Look in retailing, Ocado in on-line sales, Merlin Entertainments in theme parks and fitness chain Virgin Active.

Last year was not all bad, though, for London.

In view of a surge in secondary issues, the total raised in IPOs and secondary offerings on all sections of the LSE rose to a record 82.5 billion pounds, up16 % on 2008.

One highlight from an "old economy" company was the $500 million offering in July by Tata Steel Ltd. of India (TATIFM 13.27, +0.12, +0.91%) .

By far the biggest component of last year's offerings were rights issues from a broad range of companies on the main market, including Royal Bank of Scotland (RBS 9.39, 0.00, 0.00%) , HSBC Holdings Plc (HBC 57.09, 0.00, 0.00%)  and Lloyds Banking Group (UK:LLOY 50.69, 0.00, 0.00%) , which raised 13.5 billion pounds in November, the world's largest-ever rights issue. Secondary issues are, however, a good deal less lucrative for banks and a slew of legal, public relations and accounting advisers swimming in their wake -- which is why a lot of people in London are banking on a Happy Flotation Year in 2010

IPO comeback in 2009 sets stage for busy 2010

posted Jan 3, 2010, 2:01 PM by Yale ReiSoleil

IPOs make a comeback in 2009 setting stage for a busy year of companies going public in 2010

NEW YORK (AP) -- The pipeline of initial public offerings for 2010 looks promising as private equity firms look to cash in on their investments after coming back to the nearly defunct market in the fall.

Online networking companies may take center stage. So far, the company generating the most buzz hasn't even filed for an IPO: social networking site Facebook, which has many betting its creation of a dual-class stock structure in November is a precursor to going public.

IPO market trackers say other popular online networking companies could soon offer shares to the public. Micro-blogging site Twitter and business networking site LinkedIn will likely follow if Facebook is well received. Restaurant review site Yelp and Internet telephone service Skype, which was sold by eBay Inc. to a group of private investors in November, could also join the line.

"Once Facebook makes that move, it will literally be pandemonium," said Scott Sweet, senior managing partner at IPO research firm IPO Boutique. "It will clear the way for everyone else."

As recently as six months ago, there was little excitement in the IPO market after it dried up as the economy worsened. But a flurry of debuts came in the second half of 2009 as confidence in stock markets grew.

In the last year, companies raised about $100 billion globally, and $22 billion in the U.S., through initial public offerings of common stock. The amount raised in the U.S. is about equal to the 2008 total, but that year, the majority of the money came from the $18 billion offering of credit card processor Visa Inc. Both years combined still don't add up to the $59.7 billion collected in 2007.

In addition to the activity expected in the online networking universe, analysts predict that next year will bring a surge in filings as the economy strengthens and private equity firms invested in various companies continue to look for a profitable exit from their investments through an IPO or sale. There are already 95 companies in the IPO pipeline so far, compared with 63 public offerings this year. That's still less than a quarter of the 272 that went public in 2007.

"There's quite an appetite right now for profitable companies, and there are enough coming up that are interesting and have positive cash flow and top-line revenue growth," said Francis Gaskins of IPOdesktop.com. "The window is wide open for what I expect is a backlog of private equity deals that want to get out."

Technology companies planning IPOs are getting the most attention, including Calix Networks Inc., which provides communications systems and software; semiconductor company Telegent Systems Inc.; Newegg.com Inc., an online-only retailer that sells computer hardware, software and consumer electronics; and online marketing company QuinStreet Corp.

"There are many well-founded, impressive names out there," Sweet said. "Especially considering how active the past few months have been with the best performances coming from technology companies, I do believe venture capital firms will make a grand entrance back to the market on their credibility."

Also driving the IPO market are deals from Asia, which is enjoying stronger economy and a resurgence in investment. Companies there have clean balance sheets and earnings that are stronger than many debt-heavy U.S. firms. Offerings on exchanges in Hong Kong and mainland China have raised about twice as much as U.S. IPOs in 2009.

In the U.S., the top three performers in 2009 were out of China: water-treatment equipment maker Duoyuan Global Water Inc., online gaming company Changyou.com Ltd. and Lihua International Inc., which makes magnet wire and fine copper for use in electronics. All have at least doubled from their offering price.

Specialty chemicals maker Chemspec International Ltd. and clinical stage biotechnology company Omeros Corp. earned the dubious distinction of biggest losers among 2009 IPOs, each having fallen about 27 percent from their offering price. Chemspec, which went public in June, lowered its fiscal 2009 outlook due to low global demand. Omeros fell as it received no Food and Drug Administration approvals.

Among the biggest disappointments of 2009 was Rosetta Stone Inc., which debuted in April rising nearly 40 percent on its first trading day. The seller of language learning software canceled a secondary public stock offering in August, and in November said its U.S. consumer business was showing signs of weakness. The stock ended the year just 5 cents off its offering price of $18.

Jim Rogers: Roubini Is Wrong About Gold Bubble

posted Dec 30, 2009, 2:40 PM by Yale ReiSoleil

By: Forrest Jones

(Newsmax) -- Investment guru Jim Rogers blasted New York University economist Nouriel Roubini for predicting that gold and other commodities are becoming an asset bubble.

Rogers and Roubini have disagreed before, especially on gold, with Rogers saying prices will rise in the long-term and Roubini saying prices are bubbling.

“I am most perplexed about this alleged bubble which is out there,” Rogers told Wall Street Cheat Sheet.

Rogers has been bullish on gold and other commodities for the long term, often arguing that the weakening U.S. dollar will make commodities a better investment, pushing gold toward $2,000 an ounce, hundreds of dollars higher than where it is now.

Roubini, on the other hand, says investors are borrowing dollars to buy emerging market stocks and commodities, which is inflating the value of those assets.

Doing so further weakens the dollar and pushes up gold, but that trend will end soon, Roubini says.

Furthermore, Central Banks will begin withdrawing stimulus money from economies around the world soon and ease inflation fears, which often send investors flocking to gold.

Gold is around $1,100 an ounce recently as investors regain faith in the greenback.

“I do think the bull case for gold is going to be on hold for the rest of the year,” says Adam Klopfenstein, senior market strategist at commodities brokerage firm Lind-Waldock, according to the Associated Press.

Record £82.5bn raised on LSE despite plunge in new floats

posted Dec 29, 2009, 11:42 PM by Yale ReiSoleil

By Martin Flanagan

London (The Scotsman) -- A RECORD £82.5 billion was raised on the London Stock Exchange in 2009, but the fund-raising was driven by cash calls on existing shareholders as the number of new flotations plunged.

The overall amount raised was 16 per cent up on last year, itself a record year, but the figure masked a virtual collapse in IPOs (initial public offerings) as market conditions remained choppy for a substantial part of the year.

The number of UK and international flotations on the main LSE market slumped to just seven from 35 in 2008, while the IPO money raised crashed to £1.1bn from £6.3bn in the previous year.

It was a similar depressed flotation picture on the smaller Alternative Investment Market (Aim), where there were only 11 IPOs compared with 38 the previous year.

The amount of flotation money raised on Aim, according to the LSE data released yesterday, tumbled a third to £598m from £917m in 2008.

In 2006, before the credit crunch and subprime fallout battered stock markets, there were 89 flotations on the main LSE market and 278 on Aim.

It was a much healthier picture for rights issues by existing publicly-quoted companies this year, which rushed to repair balance sheets that had been stretched in the recession.

The amount of secondary issue money raised in 2009 rose to £76.1bn from £60.4bn in 2008, while money raised from further issues on Aim leapt to £4.6bn from £3.2bn in the previous 12 months.

Tracey Pierce, head of equity primary markets at the LSE, said that the record performance had been "despite difficult market conditions".

Pierce said: "Our markets continued to support the capital-raising needs of companies across the year, with a flow of secondary issues contributing to a record year of equity fundraising, providing firms with the backing they need to help them through testing market conditions."

Pierce added that the pipeline of new companies looking to float in 2010 was promising "although there can be no certainty regarding the timing of new issues". 

Interest in floating on the LSE had been received from a broad range of countries and sectors, she said.

Head of Aim Marcus Stuttard commented: "The fact that Aim companies succeeded in raising over £4.5bn through further issues in 2009 – capital injections which they have used to pay off debt, rebuild balance sheets and fund further growth – demonstrates how interest in small and mid-cap companies among London's unrivalled suite of small cap investors remains strong."

Among equity market highlights of the year was the £13.5bn raised by Lloyds Banking Group, the world's biggest-ever rights issue, while there were also major cash calls on investors by HSBC and Royal Bank of Scotland.

In addition, mining giant Rio Tinto raised £7.3bn, housebuilder Barratt Developments tapped shareholders for £545m and brewer Greene King, which owns Belhaven, raised £218m.

Banks and miners lift London to 15-month high

posted Dec 24, 2009, 8:25 AM by Yale ReiSoleil   [ updated Dec 25, 2009, 1:16 AM ]

By Anjli Raval

London (FT.com) -- London’s benchmark stock index reached a 15-month high on Thursday, the last trading day before the Christmas break.

The FTSE 100 closed 0.6 per cent higher at 5,402.41, the highest peak since September 2008. Trading halted early at 1230GMT for the holiday period and will resume on Tuesday December 29.

Mining stocks continued to be in focus, extending the previous day’s gains. Fresnillo, the world’s largest primary silver producer, opened 5 per cent higher at 785p after trumping an offer from Canada’s Goldcorp to buy Canplats Resources, a Canada-based exploration company, for C$254m (£152m). Xstrata added 0.6 per cent to £10.74 after its biggest shareholder Glencore moved towards a public listing by selling $2.2bn of convertible bonds. Anglo American was up 0.9 per cent at £26.90.

UK whiteboard manufacturer Promethean plans IPO

posted Dec 14, 2009, 9:45 PM by Yale ReiSoleil   [ updated Dec 14, 2009, 9:46 PM ]

LONDON (Reuters) - Promethean, a UK manufacturer of interactive whiteboards, is planning an initial public offering that would value the company at 400 million to 500 million pounds ($655.2 million - $819 million), the Financial Times reported on Sunday.

The company, based in Blackburn, England, is a world leader in interactive whiteboards which feature in around three-quarters of classrooms in British schools, the paper said.

A 400 million-pound IPO would value Promethean at 18 times last year's earnings before interest, tax, depreciation and amortization of 22 million pounds. The valuation is driven by huge growth potential in America, where only a quarter of classrooms are equipped with interactive technology.

China lets foreigners set up limited partnerships

posted Dec 6, 2009, 6:10 PM by Yale ReiSoleil   [ updated Dec 6, 2009, 6:11 PM ]

BEIJING, Dec 2 (Reuters) - Foreign firms and individuals will be allowed to set up limited partnership firms in China from March 2010, a move that could make it easier for some overseas investors to tap the domestic market.

But it remains unclear how far-reaching the rule change, announced on Tuesday, will be. The State Council said it would not apply fully to "investment-oriented" partnerships in China.

"As for venture capital enterprises and private equity funds, we still lack necessary knowledge regarding whether there are big risks, what the risks are and whether strict rules must be adopted," the cabinet said in a statement explaining the new regulation.

"Relevant sides still have different understandings," it said.

At present, foreign-invested private equity funds can be structured as limited partnerships through complex offshore platforms, but are required to be structured as corporations or unincorporated entities if investing onshore through yuan-denominated funds.

Only Chinese investors in onshore yuan funds can opt for the limited partnership structure, which offers tax advantages and caps liability.

Under the new regulation, foreign investors would be permitted to set up limited partnerships in China by themselves or with local partners.

The government added in its announcement that existing rules covering venture capital and private equity funds might still be applied.

Investors are required to contribute capital in the form of "fully convertible currency" or yuan.

Registration of these limited partnerships will take place at the local level and will not need approval from the Ministry of Commerce, it added.

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