Pets At Home is joining in what seems like an IPO (Initial Public Offering) rush on the London stock-market, with other UK-based retailers also considering the possibility of floating. Pets At Home is owned by KKR, a private equity firm. The aim of the flotation is not to raise funds for growth. It is simply about KKR cashing out. So here's the question: should you invest in this IPO? KKR know more about the future prospects of this firm than anyone else. The fact that they are bringing Pets At Home to market is therefore not necessarily a good signal - why would they sell a good prospect? Furthermore, Pets At Home has a business which has nothing unique and can easily be replicated by other firms.
As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of