IPO Eye Q3 2016

UK IPO market in the starting blocks

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The unexpected EU referendum result has compounded the slow first half of the year in the UK, which saw many businesses put listing plans on hold. The first nine months of 2016 saw a total of 46 IPOs on the London Main Market and AIM, raising a total of £3.1bn – a 47% decrease in proceeds and 11% in volume compared with the same period in 2015.

However, the summer months are a traditionally quiet period for the UK’s IPO market; a comparison of 3Q16 to 3Q15 reveals little change.

There were six IPOs in Q3, the same number as in 3Q15, but capital raised was up 18%. Newly listed stocks in 2016 have outperformed veteran assets, which are currently trading an average of 32% above list price, with only one stock with a very small negative growth. There was only one PE backed IPO.

Main market: two floats raised £183.3mn, the largest by Hollywood Bowl Group, the UK’s largest ten-pin bowling operator.

AIM: four AIM admissions raised £42mn, the largest by conference call software firm LoopUp Group plc.

Looking ahead, higher valuations and lower volatility could see IPO activity pick up. While a return to 2014’s record levels may be a stretch, activity in 2017 could surpass 2015.

 

“Following the markets’ strong recovery and the added interest of US and Asian investors looking to take advantage of the weak pound, we now expect a number of firms to dust off their IPO plans.

“It will be the specific characteristics of the individual companies that drive investor interest. Companies in the retail, technology, and media and entertainment sectors are likely to be the most attractive, mirroring previous quarters. We could well see a resurgence of IPOs in 2017, as firms look to take advantage of global investor interest in the UK market.”

Scott McCubbin, EY’s IPO leader for UK & Ireland