A fashionable flotation

Such was the demand for Gamesa shares on the first day of its stock market launch in late October that their value immediately rose by 72%. The Spanish financial publication, Cinco Días, wrote that not since the information technology firm Terra Networks debuted in November 1999 had any company seen the like in its first day of trading. Three weeks after its debut, Gamesa shares were returning 88% to the investors who took up the group's initial share allocation. Terra Networks shares have so far gained 83%.

The initial Gamesa offer, which closed on October 23, placed 30% of Gamesa's capital on the market (Windpower Monthly, November 2000). The 24.3 million shares were initially allocated at EUR 12.60. Market trading began on October 31, and by November 17 shares were at EUR 23.65, bringing the overall value of the company to EUR 1.9 billion. Foreign institutional demand was reportedly about 60 times the available shares while national institutional demand was over eight times the offer.

Some analysts have pointed to the novelty factor of Gamesa's wind activity as a contributory factor to its stock market success. "This is a fashionable sector in Europe and investors are demanding this type of product," says analyst Jose Luis Segimón, who believes that investors are tiring of pure information technology stakes and are yearning for new industrial technologies. Gamesa's lead in turbine supplies to Spain's booming wind market, coupled with its activities in the aeronautical sector -- which represents 34% of the groups sales -- makes it an attractive option, especially given that its 32% growth in turnover over the last four years has translated into 41% profits.

Investors have also been encouraged by the success of Vestas Wind Systems of Denmark, with whom Gamesa has a turbine technology transfer agreement. Vestas also owns 40% of Gamesa's wind subsidiary (main story). Vestas' floatation in 1997 has increased company share value by 400% over the last four years. The 270% increase in Vestas shares this year alone is largely attributed to a giant order for 1800 Gamesa turbines placed in January by Energía Hidroeléctrica de Navarra.

Investor confidence also stems from the onset of new wind regulation plans in the Spanish regions of Valencia, Castilla la Mancha and Castille and León, which, along with on-going work in Galicia and Aragón, will absorb the bulk of Gamesa's turbine production in the next few years. Long term investors will be looking to the potential of Gamesa's export market and will be especially interested in the company's negotiations with Vestas to extend its sales. According to Jose Antonio Nafria of Beta Capital, Gamesa's turbine activities are currently restricted to Spain, Latin America and North Africa.