Tumble weed blows across London stock market as full listings hit zero during Q3, says EY report

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  • AIM listings are down but values are up
  • Proposed rule changes to spark life into tech IPOs
  • China and Russia to fuel listings over next 18 months

While London was buzzing with Olympic fever over the summer months, main IPO market activity ground to a standstill with no full listings being recorded during the last three months.

There was always an expectation that IPOs would slow over the summer in the UK, and with only three main listings so far in 2012 compared to six over the same period last year, it was no surprise that the expected level of inactivity became a reality, according to EY’s latest IPO Eye.

AIM generated eight listings during Q3, down from 11 compared to Q2 and 15 when compared to the same period last year. This said, £214m was raised this quarter representing an increase of £118m and £29m on Q2 2012 and Q3 2011 respectively.

David Vaughan, EY’s IPO leader for UK & Ireland, commented, “A cocktail of global economic volatility, the Eurozone crisis and the UK’s summer of national celebration have all compounded to make this quarter extremely slow for IPOs.

“But AIM, which saw a drop in activity, continues to provide a viable platform for a steady flow of diverse companies looking to raise funds. Given the low market expectations for the period, AIM’s performance of eight IPOs raising an £214m can be considered a relatively positive performance.”

Tech IPOs show spark

Encouraging signs are being seen from the post-trading performance of three technology companies recently admitted to AIM. Wandisco (Sheffield-based software developer), Zattikka Plc and Incadea Plc have achieved steady growth post listing. The market should be encouraged to see that companies with good growth stories can list and raise funds successfully even in these trying economic times.

Rule changes

The government announced plans to make it easier for high-growth companies to launch initial public offerings in London. The move is being considered with the aim of enhancing London’s status as a listing destination for technology companies and thus stemming the current tide of UK tech companies departing our shores in preference for, generally, a listing in the US.

Vaughan said, “The initial reaction from the market to these proposals has been mixed. While many agree that any steps to encourage high-growth companies to list in London are to be welcomed, many question whether simply opening up a new route to market will be anything near enough to combat the perception by some that London just doesn’t have the infrastructure or legacy to make itself attractive to tech IPOs.

“Some argue that what is really needed is much more ‘grass roots’ support for high growth companies including investment in universities, eased regulation, and encouraging better early stage funding for tech entrepreneurs.”

Chinese and Russia looking to London?

The report also canvassed the views of nearly 80 respondents (45 corporate executives and 34 advisers) to gauge their thoughts on how the IPO market might play out.  Interestingly, advisors ranked China and Russia equally as being the most likely regions to fuel London IPO activity over the next 18 months. 

Vaughan adds, “Given Russia’s prominence over the past 10 years, and emerging Chinese listings in 2012, it will be interesting to see whether this market perception materialises.”

Gazing into the crystal ball

When questioned on the future pipeline for IPOs over the next 18 months, 45% of respondents said they knew of between 6-10 companies considering floating. 

Vaughan concludes, “Many believe that a major and successful premium listing would break the dead-lock, with many issuers watching Direct Line with interest.”