Private equity is stalling
Historically private equity firms have avoided flotations, preferring the control, certainty and buzz of selling to trade buyers or buy out firms. Stock market increases are giving rise to an increase in flotation, which should free up the pressure on bank funding, freeing up the market. The difficulty is that IPO will have to be priced to sell.
The Aug 09 stock market valuation increases of 25% seems to be currently driven through low trading volumes. London Stock Exchange state transactions are 30% down on July of last year, thought to be fuelling the price increase, rather than fundamental change. Commodity prices (20% of FTSE 100 index value comes from mining and oil – pretty tangible assets) however seem to be following traditional supply and demand model, with the management and constraint in supply driving prices up. The last large oil field was found 40 years ago.