Thursday, 8 December 2016

As the City’s leading Financial PR advisor on IPOs, Abchurch keeps a close eye on trends

With the current IPO market somewhat uncertain as a result of Brexit, investor confidence in companies looking to list on the London Stock Exchange is difficult to gauge.  Despite the total number of listings being approximately 50% down on this time last year, the environment within which the successful floats have occurred is important to note.  Whilst high profile floats such as Misys have hit turbulent headwinds and been forced to shelve their IPO plans in recent times, others have flourished in demanding circumstances.  Hollywood Bowl Group, the operator of bowling centres, completed their IPO with a market capitalisation of £240m; Autins Group, the insulation company, floated on AIM raising £26m; and Luceco plc, the British electronics company, listed at a market capitalisation of £209m earlier this month.

London’s Q4 IPO landscape continues to look resilient with three noteworthy floats: ConvaTec Group Plc, the medical products company achieved the largest float of the year with a market cap of £4.39bn; FreeAgent Holdings plc, provider of cloud based SaaS accounting software solutions for small UK businesses raised £10.7m with a market cap of £34.1m; and Filta Group, the kitchen specialist raised £6.2m on AIM with a market cap of £22.4m., the price comparison website also intends to float on the LSE for around £400m following its successful demerger from Esure. In fact, over 27 companies, including TimeOut and Hotel Chocolat, had floated on AIM by H1 2016 for a combined value of $1.2bn – a 72% increase on the same half the previous year.  Moreover, the average market cap of AIM companies has been growing steadily and is now at an all-time high of £83.0m in 2016.  These trends empirically validate the position that, whilst Brexit may have temporarily affected IPO confidence, there is still a healthy appetite for companies going public on the London markets at a realistic price.

This notion of market resilience is endorsed by the head of Ernst and Young’s IPO leader for UK and Ireland, Scott McCubbin, who predicted earlier this month that there will be a resurgence in UK IPOs in 2017 as companies and investors acclimatise to post-Brexit market conditions.

With interest rates remaining in the doldrums, Abchurch believes that the London Stock Exchange will remain a highly competitive exchange for future IPOs in the final quarter of 2016 and looks forward to more IPO activity in 2017. 

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