Tempted by the latest IPO? Then lie down until the feeling goes away. London’s new issues market is in danger of becoming a racket. Prospectuses are frequently published only after conditional dealings have started; banks or brokers whose analysts might be expected to take a robust view are brought on board, thus silencing criticism, while any prospective investor asking awkward questions risks being cut out of the issue.

The process has become less transparent, not more. Competition was supposed to drive down fees, but the evidence shows the opposite, and in some recent IPOs a significant portion of the flotation proceeds has gone to the advisers. One finance director who negotiated a lower price from bank A was asked by bank B to accept the tariff in return for better terms on some future deal. Some of the real clunkers can only have got away by those in charge warning potential buyers that they might not see the next (better) offer.

So who are the villains of this particular piece? Not all private equity companies have behaved badly, but a disconcerting number of the real dogs at flotation have been done over by the PE boys. They are overstocked with businesses they expected to sell years ago, before the bear market got in the way. Some of those businesses have been sold to other private buyers en route, with equity replaced by debt at each transaction.

Nobody is forced to buy new issues. Anyone tempted to do so should ensure that there’s a published prospectus, and that the business has been trading in its current shape for more than just a year or two. Then look at who’s selling in the offer. Ignoring this market completely may mean you miss the odd nugget, but it saves sifting through all that low-grade ore.

Pricey floorcovering

It’s hardly surprising that Philip Harris is reluctant to give up the carpet business. The 71-year-old knows almost nothing else, and this week rescinded his earlier proposal to leave the chair at Carpetright, arguing that 71 no longer looks old to him.

The puzzle, though, is why so many outside shareholders (his family owns a fifth of the stock) are also clinging on. Carpetright is nothing like as successful as Lord Harris’s previous venture, Harris Queensway, which made his fortune. Carpetright sales hit £475m in 2007, when EY (as it’s now called) made him entrepreneur of the year, and it’s been increasingly threadbare ever since.

The last dividend was more than three years ago, and there’s red ink all over the accounts. Yet the shares refuse to reflect this depressed reality, and actually perked up on this week’s horrid trading news. At 511p Carpetright is valued at £346m, but last year’s £448m of sales yielded just 4.7p of “underlying” earnings per share. If the housing market is picking up, it hasn’t picked up Carpetright’s carpets.

When EY was giving Lord Harris his award, earnings hit 46p a share, supporting a 33.9p dividend. Perhaps the company’s exciting new luxury vinyl tiles and lovely soft polyprop carpets will bring those days back, but it’s a distant prospect, and time is not on Lord Harris’s side, however young he feels.

Joy for jobsworths

Ooh, goody, a brand new boondoggle. The Chinese are prepared to lob in a spare $100bn as starting capital for “a new global financial institution“, and 22 other countries with too much money want to join the proposed Asian Infrastructure Investment Bank.

The first aim is to finance a rail link from Beijing to Baghdad (a sort of iron silk road) but the real attraction is to found an institution which isn ‘t controlled by the smug western bankers and bureaucrats who dictate policy at the World Bank and International Monetary Fund.

These boondoggles are easy to start, quickly sprouting their own secretariats, conferences and cushy jobs for cronies of the founding governments. The Paris-based OECD shows that stopping them is another matter. It sails on long after performing any useful function, as does the United Nations Industrial Development Organisation, or UNIDO, to which the only response is: Oh no we don’t.

This is my FT column

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