WE Soda float was ‘priced wrong’: Cautious investors wave red flags 

When Turkish chemical giant WE Soda cancelled its planned float on the London Stock Exchange this week, many were quick to conclude that the decision was a blow to the City.

But while the company blamed ‘extreme investor caution’ for its decision to pull out, those in the Square Mile tell a different story, one that instead saw investors give the firm the cold shoulder.

WE Soda’s headquarters are in London but it operates in Turkey and Wyoming in the United States, where it produces natural soda ash, used in glass manufacturing, detergents and soaps, plus batteries for electric vehicles.

The announcement that it planned to debut in the City a fortnight ago sparked hopes of a revival of London’s slumbering market, but yesterday the boss Alasdair Warren said valuations were, in the company’s opinion, ‘unrealistically low’.

Concerns: Turkish chemical giant WE Soda is owned by billionaire Turgay Ciner and his wife Didem (pictured)

‘The breadth of engagement which I talked about before was absolutely there. The issue was more about valuation,’ he told BBC Radio 4’s Today programme.

‘And it’s not just a UK issue. It’s a broader European issue around the performance of IPO’.

Analysts said investors were put off by several warning signs and decided they would bet against the stock instead should it list, a practice known as short selling. 

‘It’s certainly a good thing that UK investors gave this one short shrift,’ said Neil Wilson, analyst at financial services firm Finalto.

‘“Extreme investor caution” means “lots of interest on the short side”. It has all kinds of red flags and London showed it out.’

AJ Bell investment director Russ Mould added that WE Soda may have simply failed to live up to the City’s standards.

‘If WE Soda was asking a price investors would not pay, then perhaps they were demanding too much. It is perfectly possible that the big institutions were doing what they are paid to do –preserve their clients’ capital, as well as look to grow it,’ he said.

One thing that may have put off investors was that WE Soda wanted a value of between £6billion and £7billion which, while making it a prime candidate for the FTSE 100, may have been too high.

In the Financial Times, Craig Coben, former global head of equity capital markets at Bank of America, said WE Soda was ‘a de facto Turkish company with no public track record [and] was trying to list at a peak multiple off peak earnings resulting from peak prices for soda ash.

‘Investors were having none of it. It was too expensive and the deal was too big.’ The company was only planning to float around 10 per cent of its shares, giving new shareholders little control for their money.

Concerns could also have been compounded by the fact that WE Soda’s chairman Didem Ciner is the 43-year-old wife of the company’s current owner, Turkish billionaire Turgay Ciner, 67.

Reports in the Financial Times this week revealed that senior executives had mishandled discussions with investors, dampening its prospects. WE Soda’s strategy has fuelled scepticism about the recent changes to Britain’s stock market rules which are designed to boost the City’s competitiveness by making it easier for firms to float.

It came amid an exodus of UK companies from London to the US. In an effort to encourage firms to return, the Financial Conduct Authority has outlined plans that include removing the need for companies to have three years of audited accounts before listing, as well as loosening rules around dual-class shares which give company founders more voting power than ordinary investors.

But Mould said that the planned changes should be ‘viewed with caution’ as many of London’s current regulations had spared investors ‘a lot of pain and protected them from being swamped by a torrent of dross’.

Warren said New York was now looking like a ‘credible alternative’ for WE Soda to list.

This post first appeared on Dailymail.co.uk