Larger than expected rise points to inflation topping 3% in the second half of 2017 - EY ITEM Club comments

3 April 2017

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  • 17 IPOs raised £1.2bn surpassing levels of activity seen in Q1 2016 but raising 25% less capital  
  • The Main Market saw 12 listings while AIM saw 5 admissions
  • The ongoing volatility of the pound and continued uncertainty around the UK’s exit from the EU are expected to push back IPO activity to Q4

The London IPO market has seen a slow but steady start to the year as a result of businesses waiting on the sidelines for more clarity around the triggering of Article 50 and political personnel changes in the US, according to the latest issue of EY’s IPO Eye.

Activity, however, still saw an increase as the quarter came to an end. As a result, there were 17 IPOs in the first quarter of 2017, three more than the same period in 2016, but raising 25% less capital in Q1 of 2016. According to the IPO Eye, this is largely due to the low level of businesses outside of investment funds looking to list.

The Main Market saw 12 flotations that raised £1.1bn with the largest that by Ocelot Partners Ltd, a non-equity investment vehicle. Financial services, funds and investment vehicles dominated the Main Market with only three of the 12 listings coming from other sectors. AIM saw five admissions that raised £99m with GBGI, an integrated provider of international benefits insurance, being the largest. Two of the IPOs recorded in this quarter (Xafinityplc and Ramsdens Holdings) were private equity backed and accounted for 23% of the capital raised.

Newly listed stocks in Q1 2017 have outperformed veteran assets, which are currently trading an average of 17% above list price, with only four stocks recording small negative growth.

Scott McCubbin, EY’s IPO Leader, comments: “Volatility in currency and political uncertainty continue to hold back activity within the IPO market, in particular on Main Market listings outside of the investment industry.

“Now that the UK government has triggered Article 50 we are expecting a number of companies to list within the two year negotiating period to take advantage of the European passporting regulations, as well as the greater access to European investors that they offer. As a result, we expect to see a larger number of IPOs taking place in the last quarter of 2017 and early 2018.”