London has retained its dominance as the most attractive European IPO venue by funds raised in the third quarter, continuing the deal momentum witnessed in the previous two quarters and reaching new record highs.
Both the main market and Alternative Investment Market (AIM) have built on the resurgence of activity seen in the last two quarters, with 14 IPOs raising £2.9bn on the main market and 19 IPOs raising £1.1bn on AIM, according to new research from EY.
Funds raised by companies floating on the London stock exchange in the first nine months of the year totalled £13.4bn, exceeding the total IPO proceeds of £9.3bn generated in 2020.
London IPO market ‘never been so strong’
London also broke records with historic AIM market performance, helped by its largest ever admission in the third quarter of the year, as Revolution Beauty Group raised £300m upon listing, with a market capitalisation of £495m.
Scott McCubbin, EY UK IPO leader, told City AM that the London IPO market had “never been so strong” and was experiencing a “post-Brexit-Covid kick”.
“The time is now,” McCubbin said. “We have a level of certainty and predictability when mapping the future growth of a company that I haven’t seen since before 2008.”
Deal quantity trumps market cap
The quantity of deals across both markets was up on the last quarter – the key indicator when analysing the health of the IPO market, McCubbin stressed.
“Market cap is less important than the quantity of deals, and we should take comfort from the fact that transaction numbers are higher now, which means lots of people have confidence in the UK market.”
Listing activity in the third quarter was driven by the financial services and healthcare sectors, while the main market also bagged its biggest-ever tech float.
Wise, formerly known as Transferwise, made its market debut in July with a blockbuster £8bn IPO, marking a major boost for the capital’s tech scene.
London’s third quarter built on the momentum witnessed in the previous two quarters, which counted tech listing highs – and one notable low.
Cambridge-based cyber security firm Darktrace’s shares jumped as much as 44 per cent upon listing on London’s main market in April, boosting its market cap by half a million to £2.2bn.
But things didn’t go so smoothly for Deliveroo, whose shares slumped 26 per cent upon its debut, wiping almost £2bn from its opening £7.6bn market cap.
Future is bright for London tech IPOs
As the government presses ahead with proposals to reform listing rules in a bid to attract more high-growth tech companies to list in the UK, McCubbin believes “the future is bright for tech in London.”
“The wheels are in motion and the government’s will is there. We’re seeing an eagerness to move the process along quickly,” he said.
The total funds raised by exiting issuers during the quarter were ahead of other European markets at £8bn, bringing the total equity capital raised in London in the year-to-date to over £21bn.
Cross-border listing activity also continued apace, as eight international companies sought to list in London in the first nine months of the year.
Whilst the UK has retained its position as the leading European IPO venue by funds raised, globally it is third place behind the US and China.
Globally, equity markets also flourished as $106bn was raised in 547 deals around the world – making the first first three quarters of the year the best nine-month listing performance for over 20 years.
No ESG story, No IPO
And looking ahead, McCubbin was confident that the London IPO market would continue on the same trajectory, and that ahead of COP26, investors’ eyes would be firmly fixed on companies’ ESG credentials.
“Companies looking to IPO must have an ESG story. Put simply, ESG drives growth, and firms that have a sustainable agenda now will be the winners in future,” he said.