London’s IPO market has got off to its slowest start since the financial crisis this year as the looming Brexit date dents investor confidence.
London Stock Exchange (LSE) data, shows that in the year to 29 January just £680,000 has been raised in London initial public offerings (IPOs).
By 29 January 2018 £40m had been raised, and only by going back to 2010 can you find a year where less had been raised at this stage.
While it is early days, with money being raised in secondary markets and companies coming forward with float plans, 2019 has hardly got off to a flyer.
Investec’s Carlton Nelson, who last week advised software group Blue Prism on a £100m share placement, says there does not seem to be a slew of deals about to come to market.
“I have been speaking to fund managers over the last week and asking what else they are seeing and generally it sounds pretty thin,” he says.
“Do I think it will be a quiet first quarter from an IPO perspective? Yes. Do I think people are working hard in the background for as and when the market opens? Yes absolutely,” he adds.
Looking at the year as a whole, Mark Austin, a corporate partner at Freshfields Bruckhaus Deringer, says the deal pipeline looks relatively healthy.
“There is a decent amount of stuff in execution, quite a lot of spin-offs, quite a lot of tech activity and then a fair amount of other financial sponsor-type stuff in preparation and some international companies thinking about listing here,” he says.
Insurer Swiss Re previously announced that it was looking to float its closed book business Reassure in London in 2019.
The company says the announcement “created interest in the business” from potential investors, but says it remains “focused on the IPO preparations for Reassure”.
The UK and European savings arm of Prudential, M&G Prudential, is also set to be spun-off and listed in London, as is Investec’s asset management unit.
Last week US manufacturer Techniplas announced its intention to float on Aim, with the goal of raising $50-60m (£38-45m) on an enterprise value of $280-360m.
Its chairman George Votis told City A.M. that London “is an incredible place to do business” and that his sense is “the market is open for business”.
“We wouldn’t be making our announcement to file if we didn’t feel there would be receptivity to our business,” he adds.
It is not just Brexit which is leading to companies holding fire on potential floats, with London’s slow start replicated to some extent in Europe, where exchanges have raised the least money since 2013, and globally with the slowest start to a year since 2016.
The looming Brexit date, however, is clearly a factor in the sluggish start to 2019.
Head of equity capital markets at UBS Gareth Mccartney says: “Brexit is a headwind that certainly is putting people off from doing things in the short term.”
Another adviser says: “There are some IPOs with timetables looking at March. Do I think they will happen? I doubt it, I wouldn’t push the button if I owned the business.”
However, there is some hope that if a solution is found to the current Brexit impasse, or it is kicked further down the road, there will be companies ready to pull the trigger on floats.
“When the clouds start disappearing or falling away some people will be ready to pounce- and I suspect some of those early birds will come out favourably,” Nelson says.
Having got off to a stinker, London’s IPO market may pick up during the rest of the year, but at this stage no one predicts a bonanza.
“The sense is that, while there’s a decent amount of things in execution, because the only certainty at the moment is uncertainty, it may not be a stellar year, it is likely to be a difficult year,” Austin says.