Pact Group continues trend of disappointing IPOs

Market debutant Pact Group Holdings (ASX: PGH) continued the trend of underperforming ASX debuts after the company’s stocks plunged 13% by Tuesday’s close of trading, leaving the company’s chairman, Raphael Geminder, to defend the timing of his company’s IPO.

The plastic packaging manufacturer’s shares closed at $3.32, well below its $3.80 issue price, but Geminder, who maintains a 40% stake in the company, said that the company was not focused on short-term market volatility but that “we are in this business for long-term growth.”

The disappointing start to Pact’s listing came as fund managers expressed their concerns regarding the company’s debt levels and IPO pricing. The company carries a debt of around $603 million after the float.

The initial public offering of Pact isn’t the only market debut to have disappointed investors in recent times. GDI Property Group (ASX: GDI), which also listed yesterday, fell 12% on its first day whilst Nine Entertainment Co (ASX: NEC) and Dick Smith (ASX: DSH) both continue to trade below their issue prices. After floating at $2.35, Nine’s shares are now trading at $1.92 – down 18% – whilst Dick Smith’s are also down 7% since listing.

Foolish takeaway

Given the number of IPOs hitting the market, investors and analysts were expecting a ‘Santa rally’ but instead, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen heavily in December.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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