Despite volatility and ongoing pricing pressures, the London IPO market enjoyed a steady start to 2018, according to the latest issue of EY’s IPO Eye.
The Main Market saw nine IPOs, which raised a combined £1.147bn, while seven flotations on the AIM raised £149m in total. London’s Main Market and AIM combined saw a decline of 38% by deal numbers, while proceeds rose marginally by 6% against Q1 2017. According to the report, the fact that only one of the nine Main Market IPOs in Q1 was PE-backed held back the total proceeds raised.
The financial services sector dominated Q1 2018, accounting for 11 of the 16 IPOs and 51% of UK IPO proceeds. According to the Eye, this focus confirms that London continues to hold its position as a global financial centre despite political uncertainty.
Looking ahead, the influx of cross-border IPOs, which accounted for 26% of listings and 58% of proceeds in 2017, is likely to continue as businesses look to take advantage of the period of expected calm ahead of Brexit, the report says.
Scott McCubbin, EY’s IPO Leader, comments: “Although the market may remain low-key overall, the IPO pipeline is currently still looking strong for small Main Market listings and AIM listings. We expect to see some of the delayed listings from this quarter to come on stream in Q2 and activity to peak in Q3 for this group of companies. There are some signs of more listings from larger companies anticipating more significant deal sizes, but this part of the market is very much waiting for a first-mover to lead the way.”
Global IPO activity off to a promising start despite geopolitical uncertainties
Globally, IPO markets raised US$42.8bn in Q1 2018, a 28% increase compared to Q1 2017. Despite 287 listings, volume was down 27% compared to the same time last year, when IPOs reached the highest number of listings for a first quarter since 2007.
Scott continues: “Global growth in IPO proceeds outpaced deal numbers in a relatively strong first quarter. Driven by larger transactions, global IPO activity started out with a strong increase in proceeds in what is traditionally the slowest quarter of the year, despite a decline in deal numbers.
“The outlook for 2018 looks to be promising driven by strong equity markets and sound corporate earnings. Despite expected interest rate hikes later this year and uncertainty around potential trade policies, steady investor confidence is encouraging a healthy pipeline across sectors and markets.”