Punch flotation is back on after cut in share price

Punch Taverns floated on the stock market this week but was forced to accept a lower price for its shares than it had originally wanted.

In a double about-turn, Punch first pulled its flotation last week at the planned price of between £2.50 and £3 per share but then reinstated it on Monday (20 May) in a launch valuing the shares at £2.30.

Punch runs more than 4,000 leased and tenanted pubs.

The decision to pull the first effort to float was understood to be because some Punch investors, including private-equity consortium Texas Pacific, felt the price was too low.

The revamped flotation is on a slightly smaller scale, with only 30% of the company on offer, which would raise £160m compared with the original 40%, intended to raise £250m.

The initial shares have been sold to institutions, but unconditional trading in Punch shares is expected to begin on 27 May.

Apart from the City's perception of the initial price of Punch shares as too high, another factor that worked against the initial float effort was that independent analysts who wanted financial background on the float found details hard to come by.

"I just found it impossible to get information, which obviously makes it difficult to endorse the offer," one said.

One of the main reasons that institutions were unwilling to pay the original asking price for shares appears to have been that only £56m of the £250m raised would have been used to pay for expansion. The rest would have gone to existing shareholders, paying off debt, fees and expenses.

In the recast float, existing shareholders will get a lower proportion of the money raised but the same amount will go towards expansion.

by David Harris