UK IPO activity paused for summer as the market absorbed EU referendum result

03 October 2016

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  • Q3 2016 sees six listings raising a total of £225.3m
  • IPO activity at the same level as Q3 2015, but the capital raised increased by 18%
  • 2017 could see a resurgence of the UK IPO market as firms look to take advantage of global investor interest

The EU referendum result has compounded the so far slow 2016 for the UK IPO market, but the recovery in market pricing is likely to make IPOs an attractive option again, according to EY’s IPO Eye released today.

In the third quarter of 2016 there were a total of six listings, down from 13 in the previous quarter, but at the same level as in Q3 2015. There were two listings in the Main Market that raised £183.3m and four in AIM raising £42m – a total of £225.3m.

According to the Eye, of the six IPOs that were priced and started trading this quarter, only one was a foreign business (SEC SpA an Italian media and entertainment business that raised £3.4m) reflecting the international implications of the Brexit vote. The largest listing on the London Main Market was the operator of bowling centers, Hollywood Bowl Group plc, which was completed in the second half of September.

Newly listed stocks in Q3 2016 have outperformed veteran assets, which are currently trading at an average of 32% above list price.

Looking ahead higher valuations and lower volatility could see IPO activity pick up. According to the Eye, while a return to the record levels of 2014 may be a stretch, activity in 2017 could surpass 2015.

Scott McCubbin, EY’s IPO leader for UK & Ireland, commented: “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.”