The flotation of Indian mining group Vedanta Resources was a damp squib at best. The third largest stock market listing this year cost pounds 12m in advisory fees but it was hard to see why they wereworth it yesterday.
The company’s advisers said the offer was four times oversubscribed so they were forced to raise the number of shares being offered by 20m to 130m. But by the end of the first day Vedanta closed at 370p – 20p below the issue price.
A spokesman for the company yesterday pointed to a note from Numis’s respected mining analyst John Meyer who blamed the poor performance on hedge funds.
“The shares appear to have been placed principally with hedge funds, which are piling into the metals and mining sector but may be as fast out of the stock as into it, creating the potential for higher than normal volatility,” the Numis note said.
Surely the point of spending a small fortune employing JP Morgan and HSBC was to ensure the stock went into firm hands – institutions which could be trusted to at least wait a few days before dumping the stock. The group’s chairman, Brian Gilbertson – who received a cool pounds 6m golden hello – has some explaining to do.
His former employer fared better yesterday. BHP Billiton rose 5.75p to 470.5p as Credit Suisse First Boston increased its target price on the stock by 50p to 500p and said the firm remains its preference in the metals and mining sector. “We think BHP Billiton will continue to outperform the sector, but have difficulty seeing the sector outperform the market from current levels,” the broker said.
The FTSE 100 ended 11.2 points lower at 4367 points with telecoms company C&W and mobile phone operator mmO 2 the day’s main losers.
C&W was marked 4p lower to 129.25p in fairly hefty volume on rumours late in the day that the company is close to selling its ailing US operation but the cost to the company could be higher than expected.
MmO 2 ‘s recent good run came to a halt as Dresdner Kleinwort Wasserstein’s telecoms team dropped its stance on the stock to add because the broker believes the stock is trading ahead of itself and “upcoming news flow is neutral at best”. The stock closed down 2p at 76p. Sentiment was not helped by news that Kent Thexton, chief marketing and data officer, sold 200,000 shares at 77.5p each.
Bradford & Bingley added 5.75p to 470.5p ahead of next week’s trading statement but National Grid Transco eased 4.75p to 387p as Citigroup dropped its stance on the stock to hold from buy on fears that its plans to sell five local gas networks and invest the cash in the US will backfire.
Singer & Friedlander dropped 1.5p to 215.75p despite rumours that Fortis is stalking the company and preparing a bid. New Look picked up 1p to 308p on hopes that a bid for the retailer will emerge by Christmas.
Among the smaller stocks Stream Group added 0.25p to 23p. The premium-rate content company has been visiting institutions over the past month and the exercise in profile improvement seems to be paying off. Its broker, KBC Peel Hunt, produced a magnum opus on the company in October, saying the business was undervalued at its then price of 18p, and a further re-rating seems likely, according to some in the market.
Stream makes about 60% of its revenues – pounds 8.5m last year – from premium rate phone services accessed through fixed-line phones. The rest of its money is made through text-messaging, chat and gam ing services accessed by mobile phone.
While both sides of the business will continue to grow next year, that revenue split is expected to reverse as new services such as video streaming come on line. Already the company is providing adult video content which can be accessed on a mobile phone, in partnership with the Daily Sport.
The company recently announced the appointment of Edward Boddington as a non-executive director. Mr Boddington is a former employee of iTouch – one of Stream’s largest rivals.
Netcall added 2.25p to 29.5p as the call centre software group announced the appointment of its first chief executive. Henrik Bang has spent five years in senior management at GN Netcom, the world’s second largest provider of technology to call centres.
Shares in CMS WebView added 2.25p to 12.5p as the real-time market data specialists announced a deal with Sweden’s Cinnober that will see the two companies collaborate in the sale, marketing and management of Cinnober’s over-the-counter trading platform, CScreen.
Analysts are hoping the deal will turn into a money spinner for CMS, which last month announced plans to raise pounds 2.5m in a placing to institutions.
Mining minnow Monterrico Metals rose 14.5p to 182.5p as the company released a pre-feasibility study on its Rio Blanco copper project in Peru. The study says the company will become one of the world’s lowest-cost producers of copper when production starts in 2006. The project is expected to cost $191m to develop but have a payback of three years on a mine that could have a workable life of more than 30 years.
