IPO Eye Q4 2016

AIM listings keeping the UK IPO market’s light on

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Uncertainty around the EU referendum and the subsequent decision to exit the EU had a significant impact on the UK IPO market in 2016.

The year got off to a slow start as the first half saw some companies delaying plans ahead of the referendum, and the unexpected leave vote ensured this uncertainty carried on into the second half of the year, with a marked further reduction in deals and particularly the level of capital raised, making 2016 the slowest year for UK IPOs since 2012.

There was, however, an increase in activity as the year came to an end.

Overall there were 16 IPOs in Q4, slightly higher than the same period in 2015, but the capital raised was 50% less than 2015’s, largely due to the balance in favour of AIM IPOs in Q4.

We did see a number of high profile Main Market listings cancel during this period, and it will be interesting to see if these make a return once the uncertainty affecting the markets dissipates.

Newly listed stocks in Q4 have outperformed veteran assets, which are currently trading an average of 26% above list price, with only one stock with a very small negative growth.

There were 4 PE backed IPOs in Q4.

Main market: 7 floats raised £2.2bn in Q4. The largest was by ConvaTec, who focus on products for managing chronic conditions, including acute wound care, ostomy care and continence products, and infusion devices used in treating diabetes.

AIM: 9 AIM admissions raised £212mn in Q4.The largest was by Oxford BioDynamics, which makes epigenetic biomarkers designed to accelerate the drug discovery and development process.

 

“While the volume of IPOs has remained roughly stable compared to 2015, we saw smaller listings coming to the market this year, with AIM the most active market. This is mainly due to the number of private equity backed businesses coming to market being much smaller than usual, and currency instability.

“Currency fluctuations have meant IPOs have continued to have to price themselves at the lower end to attract investors. This low price point has led to a number of potential IPOs being withdrawn from the market, and is the main cause of the lack of activity.”

“Looking ahead we expect a slow start to 2017, but once the political dust sets on both sides of the Atlantic we are likely to see an uplift in activity in Q4 2017.”

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