Mike Timmins

After a subdued first half in 2020, in Q3 we saw the re-emergence of IPO activity, followed by a significant uptick in Q4. In the final quarter of the year, the main market had 17 IPOs raising £3.4bn (including a single issuance under the London Shanghai Stock Connect program raising £155m), compared with three in Q3 raising £3.3bn.

Activity also accelerated on AIM with 10 IPOs in the quarter raising £192m, compared with three in Q3 raising £76m.

In total, 40 IPOs listed in London in 2020 – 25 on the Main Market (including three via the London Shanghai Stock Connect program) and 15 on AIM – a total increase of 11% when compared to 2019 (36 listings). This brings total funds raised through IPOs last year - on both markets and all routes - to £9.4bn, representing a year-on-year increase of 31% from £7.2bn.

Mike Timmins, Scottish EY IPO leader, comments: “Building on the momentum that we saw in Q3 last year, the LSE successfully weathered the challenges brought by COVID-19 and bounced back in the final quarter of 2020. As well as IPOs, the markets have supported existing issuers through some of the most difficult economic times in recent history, with more follow-on capital raised in any year since 2009.

“It’s also promising to see a quarter of total funds raised in 2020 attributed to technology IPOs. These are likely to become increasingly prominent with FinTech, Tech and BioTech sectors, which are expected to be key growth drivers for the IPO market in the future.

“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market. The successful issue and subsequent share price performance of Linlithgow-based Calnex is a great example for other Scottish businesses to follow. An uptick in IPO activity may well intensify the competition for investors’ attention, placing greater emphasis on preparing early for IPO and strategic profile raising with investors. Confidence is expected to continue building with the Brexit deal now giving clarity around the future relationship with Europe and the roll out of COVID-19 vaccinations.”

At the end of 2020, the LSE 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 total capital raised by commercial companies in Europe in 2020 through IPOs was on the London markets, demonstrating the continued preeminence of the London markets in Europe. Technology IPOs raised more than 25% of the total funds raised in 2020, no doubt fuelled by the impact of COVID-19, contributing largely to market activity in London.

Follow-on activity was again strong in Q4 2020 with existing issuers raising circa £15bn, bringing the annual total to over £40bn – the largest total since 2009 in the aftermath of the financial crisis. Despite the return of lockdown restrictions, the appetite for IPOs is predicted to increase through 2021, although this may have the effect of pushing some IPOs back to later in the year.

Mirroring the activity seen in the LSE, global IPO activity continued at a pace following COVID-19 restrictions earlier in the year. Preliminary findings from the EY Global IPO trends report (due to be published on January 20, 2021) show that in Q4, exchanges witnessed just under 500 deals with more than $100bn of proceeds.

In the full year, exchanges around the world posted over 1,350 IPOs with proceeds totalling over US$250bn - 19% and 29% higher, respectively, than 2019.

The Nasdaq led the way in terms of proceeds for the full year, driven by significant US technology IPOs. In terms of overall deal volumes, the Shanghai exchanges were in the lead.

Helen Pratten, strategy and transactions partner, added: “IPO pipelines are healthy and given the performance in the second half of 2020, we are expecting a busy first half and beyond for the capital markets. No doubt there will be challenges ahead in 2021 but the markets in 2020 have been resilient to the continuing COVID-19 situation and while there is a new strain, vaccines are already in roll-out.”