London’s IPO market has bounced back in 2014 as the year shapes up to bring in a bumper crop of flotations on the UK main market.
Research by Capita Asset Services, which has administered over 60 per cent of this year’s IPOs in the UK, shows a dramatic uplift in the number of companies making their debut on the London Stock Exchange, with more companies taking to the stage than in any year since the recession.
Across the UK main market, the international market and AIM, the sum raised by companies is finally approaching pre-crisis highs. In 2006, the record year, GBP25.6bn of shares were sold in 307 IPOs. So far in the year to August 2014, GBP11.6bn has been raised through 92 IPOs, and this should reach at least GBP18.5bn by the end of the year.
Recent concerns about the appetite for initial public offerings mask an undercurrent of high value flotations in the last 12 months and flurry of activity in June and July, when GBP5.4bn of shares was snapped up by UK investors.
The UK main market in particular is already closing in on the GBP8.7bn record for money raised in 2011. By the end of August, it had already reached GBP7.4bn. If it keeps up the current rate, flotations on London’s main market could well raise GBP11.7bn before the year end, shattering pre-recessionary highs.
On the junior AIM market, only 55 IPOs have staged so far this year, a far cry from the 325 in a busy 2005. However the average raised by these 55 companies, GBP32m each, is more than at any point since records began, suggesting the market is still alive and kicking. Encouraging larger, more liquid new issues is a big positive for AIM investors.
Consumer facing companies in particular have flooded the public market across the exchange in 2014. 32 companies, one in every three floating across the UK main market, the international market and AIM, have been in consumer goods and consumer services, with 13 of these being general retailers.
Indeed 57 per cent of all the IPO money raised so far in 2014 has come to these consumer industries, a total of GBP6.6bn in the year to August. The flotation of AA Plc in June for GBP1.35bn was the largest in the period, followed closely by two international main market flotations for B&M European Value Retail (GBP1bn) and Lenta Ltd (GBP576m). On the UK main market, Saga (GBP550m), Pets at Home (GBP464m), Poundland (GBP375m), and Zoopla (GBP352m) have helped bring the total figure raised by homegrown consumer companies to GBP4bn.
Justin Cooper, CEO of Shareholder Solutions, part of Capita Asset Services, which handles the administration of IPOs, says: “The IPO gold rush in the first half of 2014 came hot on the heels of a sharp upturn in share prices, as the stock market soared at the end of 2013. However, despite a strong start, and a surprising summer flurry of flotations, those hoping to come to market in the latter half of 2014 are having to contend with a cocktail of flat markets, weak earnings and poor dividends. With a number of IPOs failing to meet expectations, enthusiasm amongst fund managers is lower than at the start of the year, and has allowed them to be more discerning as they approach the offers on the table. Indeed this fear of market saturation recently led to several companies, including Hungarian budget airline Wizz Air, to withdraw from the field.
“But that said, the economy is strong, and continuing to strengthen, and there’s still a steady stream of private owners looking to exit their business. It’s also no coincidence consumer companies are dominating the picture as spending in the UK has picked up sharply. We are a long way ahead of where we were just 12 months ago, and 2015 will likely be even stronger. Rumours resound about a potential listings of challenger bank Aldermore and telecoms giant EE among others, joining a healthy pipeline of companies gearing up to make themselves available to UK shareholders. If these all come to the market in the next year we could see the total raised by IPOs across the exchange come close to GBP30bn in 2015, comfortably above the records set in 2006.”
