Simon English: Bankers' spin cycle on AO float

THERE’S no reason not to wish AO World and its likeable founder and recently returned CEO John Roberts well. There is every reason to see the hype around the float of his business in 2014 as evidence of all that’s wrong with our capital markets.

AO floated at 285p a share, earning fees of nearly £30 million for the bankers who led the deal, the biggest recipient of which was Rothschild. JPMorgan, Jefferies, and Numis trousered well, too, for getting the float away at such an absurd price. Absurd? Well, those fees were probably higher than AO had ever made in profits. Certainly, they were more than the £8.7 million AO clocked the year before the float. Some of us thought AO was just a seller of washing machines with a website attached. And, noble calling though this may be, as a business it hardly justified a valuation that had AO – let’s go!, as the new Google.

We were slapped down. I recall the meetings, lunches and angry phone calls designed to re-educate me as such foolish thoughts were dismissed. Roberts is not just a bloke from Bolton with a nice idea about improving service in the delivery of white goods! He is a visionary! He is the Kitchen King! Like all people who start businesses after a £1 bet in a pub on Christmas Eve (true story), Roberts was well worth the £500 million that the float implied he was worth. You’d have to be a fool and a communist to suggest otherwise.

Anyhow, that float, which valued AO at £1.2 billion, hasn’t been a complete success for those who believed the hype. Today the shares are at 83p and the company is worth under £400 million.

The thing is that Roberts had no need of £500 million; £50 million would surely have done the job. What he really wanted was to build a business that changed the face of the electricals market, that improved people’s lives by getting them better tele​visions and cleaner clothes cheaper. Instead, because of the avariciousness of his bankers and the other City advisers who prey on entrepreneurs, who see it as their business to inflate new companies, take their fees and walk away, he’s a man doomed to be a disappointment, to keep missing his original goals. I know Roberts a bit and suspect this bothers him. His (former) bankers and PR men couldn’t care less.