Never buy a share in an initial public offering. No, honestly, however glittering the prospects or competitively priced the stock, those who are selling know more about it than you do. They may even believe themselves when they explain what a cracking company it is, how fast the market is growing, and what a wonderful bunch of people they have working for them.

Yet time and again, something arrives to spoil this vista of sunlit uplands. This week’s broken ankle is Footasylum, a small but frightfully modern retailer of shoes which is now even smaller. Floated last November at 164p, the shares popped to 240p before the profit warnings started. With the CEO now on an unfortunately-timed maternity leave, they are 33p.

A rather larger example is Amigo Holdings, whose customers must find creditworthy people to guarantee very expensive (50 per cent APR) loans. A hard word, “guarantee”, where you hope the guarantor understands he is liable for the whole debt should the borrower default. In June the backers took out £326m when the shares were priced at 275p, valuing the business at £1.3bn. They popped to 310p, but this week the founder and majority shareholder left the board and everyone puzzled. The shares fell to 232p.

The next candidate on the financial services merry-go-round is Funding Circle, another whizzy new-tech lender, this time to small businesses. This is expected to be valued at £1.5bn on its forthcoming flotation, with the current owners selling over £100m of shares.

Then there is Aston Martin, which at least boasts a physical product. However, investors would be advised not to look under the bonnet, since the engine seems woefully underpowered to cope with any sort of financial incline. The private equity vendors are dreaming of a £5bn valuation for a highly geared business with a decidedly unroadworthy past.

Fortunately, the ordinary Aston enthusiast is not being given the chance to get into this sale, any more than he could contemplate buying the 1961 DB4GT Zagato two-seat coupe which fetched £10m in July. The car might be a better long-term bet than the shares.

We’ve bought them enough yachts

Steve Morgan is among the most successful housebuilders in Britain. Redrow, the company he founded and still heads, has seen its share price multiply by five times since the panic that followed the banking crash. Almost four out of every 10 homes Redrow sells is through the UK government’s Help to Buy, so it is hardly a surprise that Mr Morgan would rather like to keep it after its current sunset date of 2021.

The scheme may have marginally increased the number of houses built, but it has certainly increased builders’ margins, since a house sold under HtB commands a premium of up to 10 per cent. There is growing evidence of buyers gaming the system to trade up,  while the cost to the borrower rises dramatically after five years. If the value of the now nearly-new property has not risen during that time, getting a conventional mortgage will prove challenging..

HtB was Chancellor George Osborne’s idea, but like so much else in his Budgets, was an economically illiterate crowd-pleaser. It stimulated demand for housing when the underlying problem was, and is, a shortage of supply. It is expensive for the taxpayer, too. Help to Buy Builders’ Yachts has worked brilliantly for them, and the scheme should be allowed to sink quietly beneath the waves in three years’ time.

 

Taking the long view

Only 98 years to go before Argentina’s 100-year bond matures. It seemed barely credible at the time that the country which turned default to an art form could persuade investors to lend until 2116. In the previous 100 years, Argentina had endured six debt crises (1930, 1955, 1976, 1989, 2001 and 2014 if you’re counting) but a yield of 7.9 per cent dazzled them at a moment when investors had to pay to hold German sovereign debt.

The buyers have had 15.8 per cent back in interest payments, which is some consolation for seeing the price wilt to today’s $70, where the yield is 10.2 per cent. With domestic interest rates raised last week to 60 per cent, and dollar liabilities at 45 per cent of national output, another capital reconstruction is a racing certainty. Either that, or another invasion of the Falkland Islands.

This is my FT column from Saturday

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