Who killed the Punch float?

IT took about 18 hours for the City's rumour mill to turn a piece of financial news into a mystery worthy of Agatha Christie.

The story started on Wednesday night when pubs group Punch abandoned plans for a £680m stock market listing. By noon the next day, the tale had become a whodunnit - who killed the Punch float?

Was it the fault of investors who thought they could persuade Punch to drop its offer price, but ended up overplaying their hand? Was it Punch's decision to rule out a retail offer of shares to individuals? Could HMV Group's pitiful stock market launch a week earlier have had an impact, after the book and music retailer's shares bombed on their debut?

Had investors and the financial press been alienated by the refusal of Punch's bankers to publish details about the group?

Was rival Enterprise Inns to blame, after snatching three pub estates from under Punch's nose just before the float, leaving investors wondering what goodies could be left for Punch?

Or was it the fault of Punch's adviser Merrill Lynch, which had talked up its client's prospects in the face of apathetic investors? The bank had insisted on a price range of 250p-300p a share. Had it been a little less ambitious and settled for a price nearer 220p, then perhaps the flotation would have been success.

On Wednesday afternoon, a small band of Punch and Merrill executives made their way to the City from the West End, having finished a gruelling three-week round of presentations to potential investors.

The mood was grim. Press reports had changed from favourable to damning. And investors were demanding that Punch shares should be priced at the very bottom of the range set by the company. The ten men - from Punch, Merrill and representatives of the group's biggest shareholder, Texas Pacific Group - gathered in a meeting room at Merrill's City offices. Osmond, who founded Punch five years ago, joined in via speakerphone.

The meeting was brief. The Merrill bankers were worried about what would happen to the share price after the float. They had spent all week being interrogated by bruised investors who felt sore about HMV, and were not keen to repeat the experience.

The Punch view, voiced by chairman Giles Thorley, was that they could make more money by postponing, rather than going for a low valuation now. The decision to abandon the float was made. 'It didn't take much time,' said one of those present. 'We knew we were heading for a close call so it was relatively relaxed.'

The mood, while deflated, was still bullish. 'It was a ballsy decision,' said another insider. 'The feeling was that, unlike HMV, we were not a forced seller. We could have got it away, but we didn't see why we should cede to the [pricing] demands of the investors.'

But the veneer of unity quickly crumbled. One party voiced its fury that Merrill had insisted that Punch should not embark on a big PR campaign ahead of the flotation. Shunning private shareholders was also blamed. One insider said: 'I cannot think of a company more tailor-made for the retail investor.'

Merrill will lose out on the hefty fees it would have pocketed after a successful float. And Punch has to pick itself up and continue business as usual. Apart from hefty fees for lawyers, it is financially undamaged. According to sources, there will be 'no refinancing, no repaying of loan notes, no real changes. Though the company might buy something.'

Osmond was philosophical about the business that has netted him a £150m fortune. 'It was a difficult decision, but it was everybody's decision and it was the right decision,' he said.

Within 24 hours, a 'domino effect' had started. Britain's biggest private biotech group, Ark Therapeutics, dropped its £140m share offer as a result of the Punch move. Others in the queue for initial public offerings are nervous. Expect more flotation plans to fall victim to the same forces that snuffed out Punch.