Activity expected to accelerate after slow but steady quarter for IPOs

The London IPO market has seen a slow but steady start to the year as a result of some businesses waiting on the sidelines for more clarity around the triggering of Article 50 and political personnel changes in the US, according to the latest issue of EY’s IPO Eye.

Activity, however, still saw an increase as the quarter came to an end.

As a result, there were 17 IPOs in the first quarter of 2017, three more than the same period in 2016, but raising 25 per cent less capital in Q1 of 2016.

According to the IPO Eye, this is largely due to the low level of businesses outside of investment funds looking to list.

The Main Market saw 12 flotations that raised £1.1 billion with the largest by Ocelot Partners Ltd, a non-equity investment vehicle. Financial services, funds and investment vehicles dominated the Main Market with only three of the 12 listings coming from other sectors.

AIM saw five admissions that raised £99 million with GBGI, an integrated provider of international benefits insurance, being the largest. Two of the IPOs recorded in this quarter were private equity backed and accounted for 23 per cent of the capital raised.

Newly listed stocks in Q1 2017 have outperformed veteran assets, which are currently trading an average of 17% above list price, with only four stocks recording small negative growth.

Mike Timmins, EY’s IPO leader in Scotland, said: “Activity in the IPO market continues to be impacted by currency volatility and political uncertainty, in particular on Main Market listings outside of the investment industry.

“With a two-year window permitted in the Article 50 process, while negotiations take place, and a potential second referendum on Scotland’s independence unlikely before autumn 2018 at the very earliest, we may witness companies speed up decisions within this timeframe. There is the expectation that a number of companies across the UK will list within this period in order to take advantage of the European passporting regulations as well as the greater access to European investors.

“There is a strong pipeline of Scottish companies with the potential to IPO and greater confidence in the market could drive more activity during the next 18 months to two years.”