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. Last Updated: 07/27/2016

EADS IPO Stumbles to Slow Start




PARIS -- Shares in newly formed European aerospace giant EADS had an unspectacular debut on the Paris, Frankfurt and Madrid stock exchanges Monday as investors took a cautious approach to the 3 billion euro ($2.86 billion) offering.


The shares in all three centers began trading at 19 euros ($18.07) f right in line with the price offered to institutional investors in the initial public offering. But by midday, they had slipped to between 17.83 and 17.88 euros on the exchanges.


"It's not a great start. These kinds of stocks are not a la mode at the moment, and people have questions about the heavy investment in the A3XX airplane," said a trader at a U.S. bank in Paris.


"I think people in the market will need some time to understand this company."


The 19 euro institutional price set by European Aeronautic, Defense and Space Co. bankers was below initial expectations and had been expected to prompt interest.


And retail investors were offered a 1 euro discount on the institutional price in order to lure them in.


But worries about the 15 percent French government EADS stake, the complex three-country merger process and the firm's dual management team were seen weighing longer-term on the shares and dampening institutional interest.


The company is also pouring money into the $12 billion Airbus A3XX superjumbo airplane f a project that could ultimately pay high dividends but that will show no return before the latter half of the decade.


EADS co-chief executives Rainer Hertrich and Philippe Camus both dismissed the early slip in the stock Monday, attributing it to market conditions and calling the stock a strong longer-term bet with a potential to rise above 19 euros.


"We are convinced that over the medium and long term the stock has considerable growth potential," Hertrich said at the Frankfurt bourse.