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Apr 11, 2019

Slowest quarter for London IPOs in eight years

Sixty-nine percent year-on-year decline in deal numbers

In terms of IPOs, it has been the slowest quarter in eight years on London’s capital markets in the three months to March 31, according to accountancy firm EY.

Only four London Stock Exchange main market IPOs took place between January and March, raising a combined £460 mn ($601 mn), along with just one admission to Aim, raising £21 mn, EY highlights in its latest IPO Eye report.

Compared with the same quarter last year, when there were nine main market and seven Aim admissions, that represents a 69 percent year-on-year decline in deal numbers and a 63 percent decline in proceeds.

Analyzing this downward trend, EY’s IPO leader Scott McCubbin says: ‘The slowdown in global economies, compounded with the ongoing impact of uncertainty surrounding Brexit, has led to a subdued start to the year for IPOs in London. Q1 2019 represents an eight-year low for listings.’

But he says it is not all bad news. ‘With a healthy pipeline – and perhaps a backlog – of both domestic and international candidates intending to list in London, a resurgence in activity is certainly on the horizon,’ he adds. ‘A key trigger for this will be clarity on the UK’s future relationship with Europe.’

The largest IPO in London in the first quarter was the Schiehallion Fund, the Baillie Gifford-backed pre-IPO investment company, raising £363 mn, followed by law firm DWF raising £95 mn – another example of the growing number of legal service providers going public.  

Despite the lower number of IPOs, there was a ‘significant number’ of follow-on issues in the quarter, according to EY, with 136 issuers raising just over £4 bn in the period. But while the number of issues was in line with the same quarter last year, the funds raised were roughly 44 percent lower year on year – a reflection of the muted performance of global exchanges.

‘Even in these uncertain times, a continued stream of follow-on fund-raisings demonstrates the depth of capital available to companies listing, and underlines London’s strength as one of the pre-eminent markets in Europe,’ McCubbin says.

Globally, there were 205 IPOs raising about $14.6 bn in the first quarter, marking a 40 percent decrease in deals and a 71 percent decrease in proceeds on the same period last year.

The technology, healthcare and industrials sectors were the most prolific producers of IPOs in the first quarter of 2019, together accounting for 101 IPOs (49 percent of global IPOs by deal numbers) and raising $7.8 bn in total (53 percent of global proceeds). Technology was the strongest sector with $4.2 bn raised, representing 29 percent of global proceeds.

McCubbin comments: ‘Wider geopolitical and trade issues led to a quieter-than-normal Q1 across all global markets. That said, we witnessed the recent high-profile listing of a technology unicorn in the US and we expect overall activity to increase in Q2, as geopolitical uncertainties and trade issues show positive signs of stability and resolution.’