6 minute read 21 Jan 2021
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London IPO market rebounds in Q4 2020 as resilience continues

By EY UK

Multidisciplinary professional services organisation

6 minute read 21 Jan 2021

Listing activity restarted in Q3 2020 and continued at pace in Q4 2020

Key highlights from this quarter include:

  • The Main Market hosted 17 listings - raising £3.4bn, whilst AIM had 10 new admissions - raising £192mn
  • Despite only two and a half quarters of deal activity, the London markets have exceeded 2019 activity levels with deals  up by 11% up and proceeds up by 31% 
  • Exchanges around the world closed 2020 with 1,363 IPOs with proceeds totalling US$268bn, both 19% and 29% higher, respectively, than 2019

In Q3 2020, we saw the re-emergence of IPOs after the COVID-19 lockdown. This has been followed by a significant acceleration in activity in Q4 2020 with a total of 27 listings on both markets. The Main Market hosted 17 listings raising £3.4bn, including the third listing this year under the London Shanghai Stock Connect program. The largest IPO was the listing of Conduit Holdings, that raised £821mn. 

It has also been a relatively busy quarter on AIM with another 10 companies being admitted, raising £192mn. The largest admission was Fonix Mobile, that raised £45mn.  

Despite only two and a half quarters of deal activity, the London markets have exceeded 2019 activity levels with deals up by 11% and proceeds 30% up. Through the year, we have also seen significant cross-border activity through both the Shanghai London Stock Connect program which has raised £3.3bn and more traditional cross-border Global depositary receipt (GDR) listing routes, raising £1.1bn. 

At the end of 2020, the UK maintained its third position behind the US and Chinese markets for funds raised, both in the final quarter and in the full year to date. In addition, more than 40% of the total capital raised by commercial companies in Europe in 2020 through IPOs was on the London markets, demonstrating the continued pre-eminence of the London markets in Europe. 

In terms of sectors, 25% of the funds raised this year have been raised by technology stocks including The Hut Group (THG) which was the largest IPO for three years. In line with previous years, the combined financial services sectors raised £3.2bn (or 34% of proceeds) during the year — including China Pacific Insurance (Group) Co Ltd raising £1.6bn. 

In addition to the uptick in IPO activity, the markets have played a significant role in supporting existing issuers trade through the pandemic. Over £40bn has been raised in the year, the largest annual total since 2009 in the aftermath of the global  financial crisis. 

Market performance 

The Main Market indices are all trading down compared to the start of the year. The FTSE is around 15% lower with the FTSE 250 around 6% lower. With major market sector constituents such as oil and gas, travel and financial services still feeling the pressure from the pandemic, it is unlikely the market as a whole will recover until these sectors themselves see some recovery.  

The FTSE AIM index has outperformed the Main Market trading broadly 20% ahead of where it started the year. It is driven by the performance of online retailers, tech companies and healthcare businesses seeing growth in their share prices partly as a result of the pandemic.

Main Market (£)

3.4bn

The amount raised by Q4’s seventeen floats on the Main Market

Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market. An uptick in IPO activity may well intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors. Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the roll out of COVID-19 vaccinations.
Scott McCubbin
EY UKI IPO Leader

Global IPO activity 

Mirroring the activity seen in London, global IPO activity continued at a pace following COVID-19 restrictions earlier in the year. In Q4 exchanges witnessed 490 IPOs with proceeds of $101bn. This represents a 30% increase in the number of deals and a 9% increase in proceeds compared to Q4 2019, notwithstanding the fact that Q4 2019 figures included the $29bn proceeds from the Aramco IPO.  

In the full year, exchanges around the world posted 1,363 IPOs with proceeds totalling US$268bn, both 19% and 29% higher, respectively, than 2019. NASDAQ was in front in terms of proceeds for the full year with $55.3bn being raised, mainly driven by the volume of significant US technology IPOs. In terms of overall deal volumes, the Shanghai exchanges were in the lead hosting 223 IPOs. 

 In terms of sectors, in a year dominated by COVID-19 pandemic, technology IPOs led the way with 324 deals raising $89b. Industrials followed with 243 deals and $31bn proceeds and healthcare, in third place, with 235 deals and $50bn proceeds.  

Private equity (PE) and venture capital (VC) backed IPOs continued to account for 14% of global IPOs by number and 33% by proceeds. In the US, the percentage PE-backed and VC-backed IPOs was significantly higher, representing 52% in volume and 78% in proceeds. 

Looking forward 

Despite the impact of the new year lockdown on the economy, we expect the levels of listing activity seen in Q4 2020 to continue into 2021. Confidence continues to build with the Brexit deal now giving clarity around the future relationship of the UK with Europe and the accelerating roll out of COVID-19 vaccinations. 

As we go to press, we have already seen a number of potential issuers file their registration documents indicating their intention to list in Q1 2021.  

Given the level of total funds raised in 2020 attributed to technology IPOs, we are likely to see growth in activity in the FinTech, Tech and BioTech sectors across the coming year whereas more traditional sectors may well take a back seat this year given the COVID-19 impact on business models. 

An uptick in IPO activity may also intensify the competition that issuers face for investment, placing greater emphasis on getting ready early for IPO and raising profile with investors so that they are well placed to take advantage of IPO windows as they open.

Globally 

As we look ahead, global IPO pipelines remain healthy. We expect IPO activity across all major geographies to sustain the momentum going into the first half of 2021 as companies take advantage of high liquidity and positive news flow regarding vaccine implementation programs.   

There is also uncertainty around whether the COVID-19 vaccines and other measures will control further spread of the pandemic, which is critical for the global economic recovery. As a result, we may see a burst of activity as issuers transact whilst IPO window remains open.  

In terms of sectors, we expect that technology and healthcare IPOs, which excelled during the pandemic, will likely do well in 2021, as some temporary consumer and workforce shifts become permanent and governments continue to allocate budgetary resources to pandemic-related healthcare activities. We also expect to see an increased focus on the renewables sector. 

AIM (£)

192m

The amount raised by ten admissions to AIM in Q4

Summary

Despite the impact of COVID-19, there has been an acceleration in activity in the final quarter of 2020 which is predicted to continue through 2021.

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By EY UK

Multidisciplinary professional services organisation