IPO Eye Q2 2017

UK IPO activity: has the main market climbed its way back?

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With expectations that the general election would bring political stability, more IPOs took place in 2Q17 compared with the first quarter. There were 18 new listings in the second quarter, with 11 IPOs on the Main Market and 7 IPOs on AIM raising £4.2bn altogether – a 24% rise in deal numbers and 200% increase in proceeds.

With the FTSE at record levels, largely driven by the weakness of the pound, which made UK investments attractive to international investors, newly listed shares on the combined markets are currently trading on average 12% above offer price.

There were two PE backed IPOs in 2Q17.

Main market: 11 floats raised £3.8bn in Q2. The largest by, Irish Bank, Allied Irish Banks plc – which raised £2.62bn.

AIM: 7 AIM admissions raised £496mn in Q2, the largest by Eddie Stobart Logistics plc, which operates 2,200 vehicles, 3,800 trailers and 24 distribution centres across the UK and Europe.

 

2017 global IPO activity is set to outpace 2016. The year has seen a strong start for IPOs globally, with equity indices trending upward and low volatility enabling transaction windows to remain open. Liquidity is ample, and economic fundamentals are improving in most developed markets.

The first half of 2017 (H1 2017) saw a rise of 90% by proceeds and 70% by number of deals, compared with the first half of 2016 (H1 2016). H1 2017 was the most active first half of year by global number of IPOs since H1 2007, which saw 941 IPOs raising $146.0bn.

Asia-Pacific accounted for 61% of global IPOs and 44% of global proceeds in H1 2017 – the highest IPO numbers in 15 years, when we look at activity levels in the first half of year period.

China’s Shenzhen and Shanghai exchanges led by number of IPOs, accounting for 17% and 16% of all IPOs worldwide respectively. The increase in IPO activity level was partly a result of effort by the regulator, China Securities Regulatory Commission (CSRC), to speed up the approval process.

Globally, financial sponsor-backed IPOs fell as a proportion of all deals (11% in H1 2017 versus 15% in H1 2016). PE funds still have large cash reserves, and in some cases M&A offers them higher returns during the dual-tracking process.

Technology, industrials and consumer products are the sectors that dominated global IPO activity in 2Q17. Other sectors dominated in local areas: health care in EMEIA, energy and financials in Greater China.