Home-grown listings emerge to break London IPO drought, says EY report

19 April 2013

  • Share
  • Four UK companies list on the Main Market and have seen stable post-trading performance.
  • Main market listings raised cumulative funds of £1.24bn this quarter alone – more than the entire of 2012.
  • Q1 sees most Private Equity (PE) backed businesses come to public market since 2007

IPOs appear to be back on the agenda for UK corporates in 2013, with four home-grown companies listing on the Main Market during the first three months of this year.

Two listings and two re-admissions took place raising cumulative funds of £1.24bn, which eclipses the funds raised for the whole of 2012, according to EY’s latest IPO Eye. £178m was raised from two listings during the same quarter last year.

David Vaughan, EY’s IPO leader for UK & Ireland, commented, “Last year was one of the driest on record for Main Market IPOs with only four listings raising just over £1bn. Market expectations moving into 2013 were subdued, albeit layered with a cautious optimism largely down to Direct Line’s successful listing, thankfully this optimism was well placed and we have seen a significant uptick in activity.

“The obvious highlight of this quarter is that four UK companies have managed to raise funds and have seen stable post-trading performance. It’s also encouraging to see that these businesses were from a range of sectors and not just natural resources sector, which has dominated the London market in recent years.” 

AIM generated five listings during Q1, the same number when compared to Q4 2012 but funds raised were down - £20m compared to £28m. The diversity of the London Market was again reflected with four of the five AIM admissions originating from two US and two Israeli domiciled businesses.

Return of the Private Equity backed IPO?

The report reveals that the first quarter of 2013 has seen the most Private Equity (PE) backed businesses come to the public market since 2007. Within the first three months of this year Crest Nicholson (Varde), Countrywide (Oaktree), HellermannTyton (Doughty Hanson) and E-sure (Penta Capital and Electra Partners) all listed successfully.

Vaughan says, “One of the drivers for this increase may be that the IPO discount demanded by institutional investors is much more palatable to PE when the stock-market is at a record high and therefore comparators are particularly favourable. Should the markets fall back, it is unclear how willing PE investors will be to continue to support this discount.”

He continues, “The medium performance of these first listings will be vital in establishing confidence in PE backed IPOs, which will help to build trust between the PE industry and the institutional investor community.”

London sees impressive post-IPO gains

Post IPO performance has been impressive for those businesses which listed in 2012 and for those which made it into the IPO market this year. At the end of the first quarter, Crest Nicholson was up 34% since listing in February and Countrywide saw its shares gain 11% by quarter end.

Vaughan concludes, “As the ITEM Club forecast indicates, there are positive signs in the equity markets and the prospect of the UK IPO market beginning to thaw. However, as we’ve repeatedly said over the past four years of the financial crisis, we’ve been here before.”