The London stock market witnessed a very slow start to 2023, with five issuers raising just £81m in the first three months of the year.
The main market saw only two IPOs, which raised a combined £63m, while the Alternative Investment Market (AIM) saw three admissions in the quarter, raising £18m. The largest main market IPO in the period was Dar Global plc which raised £60m and the largest AIM admission was Onward Opportunities which raised £13m.
The exchange’s performance during the first quarter of 2023 is a significant decline when compared to the same period in 2022 when there were 12 IPOs on the main market and seven on AIM, which raised a combined total of £0.4bn. The equivalent period in 2021 saw £5.7bn raised in the UK markets.
Scott McCubbin, EY UKI IPO Leader said, “The London IPO market continues to experience the extremely challenging conditions witnessed in 2022. There remain strong headwinds including the war in Ukraine, high energy and commodity prices, and wider inflationary pressures.
“We expect the market to remain challenging for the next few months, albeit with some green shoots in the form of an expected reduction in inflation by the year-end. This should help see a return to a stronger equity market later in the year. However, this remains at risk given the continued uncertain geopolitical landscape.”
Global IPO activity has also seen a downturn, with proceeds down across all global markets
Global IPO markets saw 299 IPOs in Q1 2023, raising $21.5bn. This is 8% lower in terms of the number of IPOs and 61% lower in terms of proceeds when compared to Q1 2022. As with the UK market, geopolitical tension, commodity and energy price rises and the impact of the turbulence in the global banking markets has led to a reduction in the number of IPOs.
Technology companies, which have been a mainstay of IPO activity in recent years, experienced some notable declines in valuations. This has been driven by high inflation and investor demand for profitability over growth and intensified by the recent market turbulence in the global banking and crypto markets. While the technology sector continued to lead in terms of IPO volume, four of the top 10 listings in Q1 2023 were in the energy sector.
SPAC IPO activity was at a six-year low in Q1 2023. With many promoters of SPACs listed in early 2021 needing to complete or unwind their transactions, SPAC IPO activity is likely to be muted in the near term.
Meanwhile, the Asia-Pacific IPO market accounted for 59% of global IPO deals, but still saw activity decline 6% by number of deals and 70% by proceeds compared to Q1 2022. Despite the lifting of almost all pandemic control measures earlier this year, the Mainland China market was more subdued than usual, but still accounted for more than 40% of all global IPO proceeds.
Debbie O’Hanlon, UK&I Private Leader, concluded: “Global IPO markets continue to face significant geopolitical and macroeconomic headwinds, with activity at the lowest levels seen for many years. Businesses will need to navigate the high-cost and reduced liquidity environment for a little longer, with the outlook for Q2 2023 expected to remain challenged.
“Once there is evidence of a more stable market, investor confidence should return, and prominent companies that had postponed IPO plans may restart, albeit with companies needing to accept lower valuations than were being obtained in the 2021 peak.”