What started like a dream ended like a nightmare. The IPO to sell 30% of the Spanish lottery company Sociedad Estatal Loterías y Apuestas del Estado (Selea) lost significant ground during the past few days. Spain's Minister of the Economy and Finance conceived the deal with intentions of selling its largest public company for around 21 billion euros and nothing less than 18 billion euros. But they did not count on their enemies creeping in.
"All indicators showed that they were not going to get sufficient aid from institutional investors. Without this support the IPO would have registered a loss for the company and this was the reason for the change," affirmed Soledad Pellón from IG Markets.
A lack of support that, according to sources in the markets, would be led by some of the private placement banks, especially those in Spain. The same sources note that premarket value of some of the global placements is currently around 15 billion euros, which equals a discount of 43% with respect to the average valuation of global deal coordinators, even though they guaranteed a placement on the retail level.
To further discount Loterías to 15 billion (which would provide Spain with 5 billion in revenues) would offer investors a dividend yield around 14% and issue EPS (earnings per share) payments 7.5 times. Not to mention that the company had agreed to pay 12 dividends per year, something unheard of in the Spanish stock market.