Recent announcements of cleantech IPOs have prompted one or two stockmarket commentators to suggest that this is evidence of a dot.com-style ‘bubble' in the cleantech sector.
This does not quite stack up. August’s flurry of cleantech IPOs has clearly failed to ignite a passion for cleantech stocks during recent weeks, as our monthly survey of cleantech indices shows (see page 8). In fact, anyone who thinks that cleantech stocks are in the midst of a bubble should consider that the major cleantech stock indices that we follow are still down between 15.9% and 29.3% on the levels at which they began this year.
The dot.com bubble was preceded by several years of substantial growth in technology and Internet-focused stocks before it finally popped. Yet, it was only in March 2009 that many cleantech indices hit a low point, and the gains seen since then can hardly be described as a ‘bubble’.
For example, Germany’s ÖkoDAX index, which follows the ten largest cleantech firms listed in that country, is currently around one-third higher than its low point of 178.51 points some 18 months ago. A decent rise, yes, but this is still a long way from its high of 850 points, achieved in the summer of 2007.
In fact, to some in the sector it might be surprising that any cleantech firm is choosing to float at all, given the poor general performance of cleantech shares this year. But the real reason why many of these firms are coming to stockmarkets now is because their current backers need the capital.
ENEL Green Power is a case in point. As Nigel Hawkins points out on page 4, the main driver behind that flotation is the £3 billion it will raise so that ENEL Green Power’s parent company, the Italian utility Enel, can make a dent in its colossal £40 billion-plus debt.
For sure, many of the cleantech companies that plan to float soon – as well those which have floated recently – look set for long term success. But surely the people who steer these businesses would have preferred to wait until they had achieved a couple of years of healthy profits before hitting the stockmarket, when they would be able to command much greater valuations and so raise more cash to fund faster growth.
The fact is that needs must, and this autumn seems to be a window of opportunity for venture capitalists and other owners of private cleantech businesses, who may not feel they have the resources to continue to fund such companies all by themselves during the coming months and years.
What the recent IPO activity does not represent is a bubble. No doubt a bubble in cleantech will appear one day, but I fear it is unlikely to happen for a few years yet.
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