Hurrah for the capital
A high number of technology listings in the London IPO market led a resurgence of large flotations in Q2 2018, according to the latest issue of EY’s IPO Eye.
Overall, the second quarter saw 17 IPOs, one more than in Q1 2018 and six more than Q2 2017. There were six IPOs in the Main Market raising a combined £1.4bn and 11 flotations on the AIM raising £697m. The average market capitalisation during Q2 2018 was nearly £320m across both markets demonstrating the overall growth in the size of deals taking place in London.
The technology sector led UK IPO activity accounting for five of the 17 listings and raising £911m. Support services and equity investments were the two next most active sectors with three listings each raising £133m and £128m respectively.
Scott McCubbin, EY’s IPO Leader, comments: “The London IPO market is becoming more active and diverse with a strong increase in the market capitalisation of the companies listing. The emergence of several technology and gaming IPOs this quarter also demonstrates that the UK can be a leading destination outside of the US for tech IPOs.
“Looking towards the second half of the year, we can expect to see a significant volume of activity in Q3 and early Q4 as companies rush to take advantage of regulatory stability ahead of Brexit. Activity levels in early 2019 are expected to be more subdued due to uncertainty over the UK’s Brexit deal.”
Global IPO slowdown but activity expected to pick up towards end of year
The risks and uncertainties from geopolitical frictions and shifting trade policies have contributed to declines in global IPO activity in Q2 2018, resulting in 660 IPOs in H1 2018 (287 in Q1 vs 373 in Q2), a 21% decrease from H1 2017. However, despite this slowdown, global IPO markets raised US$94.3bn in the first half of 2018, a 5% year-on-year increase and the highest proceeds for the first half of a year since H1 2015.
Scott continues: “Global IPO figures for the first half of 2018 dipped by volume compared with the same period in 2017, despite higher valuations on some of the world’s largest markets. The good news is that economic conditions continue to be encouraging, equity valuations are high in many parts of the world and interest rates remain low. As a result, we expect a resurgence in global IPO activity during the second half of 2018.”