Uncertainty acts as a drag on IPO market
The UK’s IPO activity has seen a decline in volume and value in the third quarter, with an uncertain market and the low value of the pound blamed.
Aston Martin floated last week, at the start of Q4, and – along with Funding Circle, which floated at the same time – had a bumpy start to life as a public company.
Analysis by EY showed there were eight IPOs on the Main Market, compared with 14 for the same period in 2017. There were five flotations on AIM, down from 16 a year earlier.
Financial services was the most active sector by deal number, claiming six of the 13 IPOs on UK exchanges in the quarter and raising £743m.
However the total value was just £1.0bn – down £2.54bn, 71%, on the previous year.
Scott McCubbin, EY’s IPO Leader, said: “Brexit uncertainty continues to cast a shadow over the London market making it hard to predict how IPO activity will unfold over the next few months.
“IPO candidates are keeping an open mind when it comes to exit strategies, which can lead to lower IPO volumes in 2018. For example, companies considering an IPO have accepted an acquisition offer instead, either from large corporations looking to add to their portfolio, or from cash-rich PE firms. However, the market has responded well to those that chose to list.”
According to the EY IPO Eye, the low deal volume and proceeds largely reflects the lack of investor appetite for IPOs in a volatile and uncertain market combined with the continued low value of the British pound.
