While the timing of a recently announced initial public offering (IPO) by holding company Infortar might be good, much depends on the offered price, when it comes the flotation's attractiveness to investors, some experts say.
Infortar on Monday unveiled its plans for an IPO and to be listed with Nasdaq Tallinn, the Tallinn Stock Exchange
The company's portfolio is primarily in energy, shipping, real estate; one of the companies it owns, shipping line Tallink Grupp AS, is already listed on the exchange.
Infortar has not yet published the details of its share issue.
Peter Priisalm, fund manager with Avaron Asset Management, said: "My expectation is that investors will be given the opportunity to buy shares below equity price. Naturally, this is easier for them to do, given that they were also able to purchase the Latvian gas network below the price of their assets."
Another of Infortar's companies is Eesti Gaas, which operates in Latvia, Finland, Poland and Lithuania, in addition to its home country.
Tallink's price differential is also partly the reason why Priisalm foresees a cheaper price. "Offering an option to buy below the equity price, that's part of the deal, is it not? And investors are likely not ready to pay more for Tallink than what they would pay on the stock market today. That would be illogical," Priisalm said.
Meanwhile Henrik Igasta, managing partner of the Superia Baltic financial advisory firm, the timing can be quite well picked, considering that Infortar has been talking about going public for a long time. "At present, it's as if there's a window there, for a while."
"Interest rates, or expectations on these, have come down a bit and brought some oxygen to the markets. At the end of the day, they are trying to schedule [the IPO] in this window, right now," said Igasta.
"No one can predict what will happen in the next 12 months. So where do you push things? Now it seems that, for the meantime, perhaps volatility in the markets has died down; that maybe it's a good time to come out with this matter. I see other IPOs coming to market in Europe in the coming weeks," Igasta added.
Peeter Koppel, head of investment at Redgate Capital, welcomed the news, saying "It's always nice when more large-cap companies enter the market," since this boosts the stock market's credibility, presumably lifting up all the ships in the harbor with it.
Peter Priisalm said that he would foresee a dividend yield of 3-4 percent from a company like Infortar, which could also expect growth, and lead to a share price around the €25-€33 mark.
Infortar did say Monday that it plans to pay annual dividends of at least one euro per share, and also to forward the dividends of Tallink to Infortar's shareholders in the forthcoming year.
As of Monday, Tallink's issued shares are valued at €19.85 million, or €13.23 million more than at the end of September.
As of the end of September, Infortar owns 42 percent of the shipping group, which would be worth €217.3 million based on the above stock market price.
In the same holding company's balance sheet, however, the stake is reflected in the value of €326.7 million. In other words, the stock exchange price of the share is 33.5 percent lower than stated in the balance sheet.
Ultimately, the ball is in Infortar's court as to return to investors, Priisalm said, and striking a balance here is one of the major tasks facing organizers of any IPO.
It is harder, partly due to volatility in the context of the ongoing war in Ukraine, to evaluate the energy business side to Infortar, namely Eesti Gaas, which operates in the Baltic states, Finland and Poland, than it is the shipping and real estate dimensions to the firm, Priisalm said.
Henrik Igatsa said that further clarity is expected in the next 10 days.
Infortar's IPO is being conducted by LHV and Swedbank.
Last year, the group made a profit of 96.1 million euros on a turnover of €1.05 billion.
In the first nine months of this year, Infortar's turnover was reported at €746.9 million; profit at €269.6 million
Infortar CEO Ain Hanschmidt says that since Infortar has become one of the largest companies in Estonia, with a turnover of €1 billion going public constitutes the next logical step towards further growth and returns to investors.
Editor: Andrew Whyte, Huko Aaspõllu