Stronger UK IPO activity in Q2 could pave the way for London market revival

3 July 2017

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  • 18 IPOs raised £4.2bn marking the return of significant sized IPOs to London
  • The Main Market saw 11 listings including the largest float in Europe for 2017, while AIM saw 7 admissions
  • Outlook for the second half of 2017 is robust as markets stabilise

The second quarter of 2017 signaled the return of higher value IPOs to the London market with 18 listings, according to the latest issue of EY’s IPO Eye.

The number of IPOs may be up by just one compared to Q1, but this quarter saw proceeds increase by 200%, the report says. Overall there were 18 IPOs raising £4.2bn with 2 being backed by private equity. The energy sector and banking/financial services sectors led UK IPO activity in this quarter accounting for 9 of the 18 listings. Despite continued currency volatility, there were 4 cross-border IPOs in Q2 with listings by companies based in Turkey, UAE, China and Ireland.

The Main market saw 11 floats that raised £3.8bn in Q2, including the largest IPO in Europe so far this year, which raised £2.6bn marking the return of significant sized IPOs to the London Market. In addition, there were 7 admissions in the AIM that raised £496m.

With the FTSE at record levels, largely driven by the weakness of the pound, which made UK investments attractive to international investors, newly listed shares on the combined markets are currently trading on average 12% above offer price.

Scott McCubbin, EY’s IPO Leader, comments: “The number of companies in the IPO pipeline continues to build and activity is likely to see a revival towards the end of the year. Currency volatility is likely to continue to supress activity within the large cap IPO market, but the success of some listings this quarter may result in reinvigorating markets’ confidence and speed projected timescales up. There are signs that investors seem once again ready to look at the UK market large cap IPOs so we can expect a number of higher value IPOs in late 2017.”

Global IPO activity rebounds in H1 2017
 

The global IPO market in the first half of 2017 has been off to one of its strongest starts in nearly a decade. H1 2017 saw proceeds rise by 90% (US$83.4b) and the number of deals increase by 70% (772 IPOs) compared with the first half of 2016. In addition, with 772 IPOs raising US$83.4b, H1 2017 was the most active first half of a year by global number of IPOs since H1 2007. 

Scott McCubbin, continues: “Economic fundamentals are improving in the major developed economies and IPO pipelines are building. Activity is underpinned by rallies in many bull markets reaching all-time highs, while investor sentiment has brightened and global outlook is positive. With the momentum of the first half, 2017 is poised to surpass 2016 global IPO levels by both number and proceeds.”