The London IPO market slump keeps on into this year as inflation, high interest rates and geopolitics weigh on the minds of companies. In the first half of 2023, 18 insurers raised £593 million on the main market. Most of the activity emerged in the second quarter, with 10 main market IPOs raising £497 million according to figures compiled by EY.
Proceeds raised in the first half of the year remained flat compared with the same period in 2022, with the market pulling in £594 million. The number of deals dropped 36 per cent from 26 issuers in the first six months of 2022. Scott McCubbin, IPO leader for the UK and Ireland at EY, said macro-economics and geopolitical challenges continue to put pressure on the listings market.
“These headwinds will need to abate to enable real growth. However, with some larger IPOs expected in 2024 and a strong pipeline, the long-term outlook looks more positive,” he said. Both 2023 and 2022 marked a more than 90 per cent decrease in funds raised on 2021 when 47 IPOs pulled in £9.4 billion in the first six months.
The UK has lost some high-profile IPOs in recent months. In March, chip manufacturers Arm decided on a New York listing and soda ash maker WE Soda pulled its London IPO in June because of “extreme investor caution”, only a week after announcing its intention to list. FTSE 100 constituents CRH said it would transfer its primary listing to New York.
Both public and private players in the industry are moving to stem the tide and make London a more attractive place to list. The Financial Conduct Authority announced in May it would scrap the premium-listing category and do away with shareholder voting for transactions. McCubbin said the FCA’s proposal would have a positive impact if part of wider reforms but warned it could also turn off some investors.
“The proposals will remove some key, post-listing, investor protections for which the London stock market is well-known,” said McCubbin.
“This increase in investor risk could reduce the appeal of the UK market to investors so it is imperative a balanced approach is considered to make London a more attractive destination to list.”
The Capital Markets Industry Taskforce is also developing a “comprehensive, concise and easily understandable report” that would serve as the definitive view of what needs to be done to boost UK listings. London’s flat performance so far is better than the global trend where proceeds for new listings were down 36 per cent year-on-year.
The UK did, however, see a more significant decline in IPOs in 2022. Worldwide, there were 615 IPOs raising $60.9 billion. The US saw a 87 per cent pick up, though that is mostly attributed to a spin-off IPO of Johnson & Johnson’s Kenvue, a major maker of household health products.
With 11 listings, the NYSE raised close to $5.9 billion and the Nasdaq raised nearly $3 billion through 53 IPOs. Asia continues to dominate, making up 60 per cent of the IPO market. On the matter of IPOs, UK investment bank Numis said IPO and M&A were impacted in its fiscal year third quarter, and that revenue was “below the first half run-rate”.
Numis’ revenue has declined over the past three months and has warned the deal slump will last the rest of the year. It posted profit of £5.6 million for the first half of its fiscal year – down 60 per cent compared with the prior period – while revenue of £63.8 million was down 14 per cent.
Deutsche Bank swooped on Numis as April the first in a wave of consolidation in investment banking. Deutsche’s £410 million take-over of Numis will bring in an additional 170 corporate clients and take its UK-focused dealmaking team to more than 150 bankers. It expects the Deutsche Bank takeover to complete in the last quarter of this year.
(The writer is our foreign correspondent based in the UK)
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