The year has ended on a high for initial public offerings (IPO), thanks in part to Worldpay’s success recently on the London Stock Exchange, and the pipeline looks positive for 2016, according to EY research.
After a record-breaking 2014, 2015 has been something of a disappointment, especially the third quarter, which EY said was subdued following the UK General Election, and saw IPO activity drop to its lowest level since 2011.
In 2015 to date, there have been 60 IPOs, compared to 93 last year, raising £10.5bn, down from £13bn. But, so far in the fourth quarter this year, there have been 10 listings on the main market, and three on AIM, raising a total of $4bn, compared to £194m from six flotations in the previous three months, a sign investors are taking advantage of a more stable political landscape.
The bulk of the IPO activity was thanks to private equity exits: 60 per cent of the listings on the FTSE were backed by private equity, and they raised 88 per cent of the capital. All of the largest IPOs this year, except McCarthy & Stone were private equity exits.
“Given the current difficulties in the corporate bond market we anticipate that IPOs will become the favoured method of raising capital in 2016, remaining the strong alternative for exit strategies,” said Scott McCubbin, IPO leader for EY UK.
“We have seen strong after-market performance, indicating that the pricing concerns of 2014 have been overcome and a foundation for stronger market growth next year has been established. Given the strong performance overall for newly listed shares, against the performance of the FTSE 100, we expect investors to still have an appetite for IPOs," he added.