Friday 20 October 2017

Digicel cancels IPO: Five key points behind the decision

Ailish O'Hora

Ailish O'Hora

MOBILE and communications firm Digicel has pulled its $1.8bn New York flotation plan at the 11th hour citing current market conditions. Here are five key points about the decision:

1. Stock market conditions: There were five flotations on Wall Street last week and in all cases, shares were sold at below the expected range. Digicel's target price per share was between $13 and $16 and the company was due to release the exact price details today.

2. Proceeds: Digicel had planned to use between $1.2bn and $1.3bn of the flotation proceeds to reduce down the company's debt. Last night, Digicel owner, businessman Denis O'Brien, said the company would continue to exploit business opportunities.

3. Timing: Despite Digicel having €6.5bn in gross debts, the company does not have any maturities until 2021. In addition, Mr O'Brien said Digicel is generating strong and growing free cash-flow.

4. Pricing:  Essentially, the IPO had been predicated on achieving fair value for the company. Given recent discounted IPOs, the move, at this time, was seen as a less attractive route for the firm.

5: Future: Digicel could still float in the short to medium-term. There are also other ways to raise funds including rights issues or outright sale, although the latter is a less likely route.

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