IPO activity set to surge in 2021, says new report

Competition for investment is set to intensify after the UK markets closed last year with a flourish of activity, which is predicted to continue in 2021, according to EY’s latest market tracker IPO Eye.

After a subdued first half in 2020, in Q3 we saw the re-emergence of IPO activity, followed by a significant uptick in Q4. In the final quarter of the year, the main market had 17 IPOs raising £3.4bn (including a single issuance under the London Shanghai Stock Connect program raising £155m), compared with three in Q3 raising £3.3bn. Activity also accelerated on AIM with 10 IPOs in the quarter raising £192m, compared with three in Q3 raising £76m.

In total, 40 IPOs listed in the UK in 2020 – 25 on the Main Market (including three via the London Shanghai Stock Connect program) and 15 on AIM – a total increase of 11% when compared to 2019 (36 listings). This brings total funds raised through IPOs last year – on both markets and all routes – to £9.4bn, representing a year-on-year increase of 31% from £7.2bn.

At the end of 2020, the UK maintained its third position behind the US and Chinese markets for funds raised, both in the final quarter and in the full year to date. In addition, more than 40% of total capital raised by commercial companies in Europe in 2020 through IPOs was on the UK markets, demonstrating the continued preeminence of the market in Europe. Technology IPOs raised more than 25% of the total funds raised in 2020, no doubt fuelled by the impact of COVID-19, contributing largely to market activity in London.

Follow-on activity was again strong in Q4 2020 with existing issuers raising circa £15bn, bringing the annual total to over £40bn – the largest total since 2009 in the aftermath of the financial crisis. Despite the return of lockdown restrictions, the appetite for IPOs is predicted to increase through 2021, although this may have the effect of pushing some IPOs back to later in the year.

Dan Salt, a director and head of the M&A team at EY in Birmingham, said: “Building on the momentum that we saw in Q3, the UK markets have successfully weathered the challenges brought by COVID-19 and have bounced back in the final quarter of 2020. As well as IPOs, the markets have successfully supported existing issuers through some of the most difficult economic times in recent history, with more follow-on capital raised in the year since 2009.

“It’s also promising to see 25% of total funds raised in 2020 attributed to technology IPOs. These are likely to become increasingly prominent with FinTech, Tech and BioTech sectors expected to be key growth sectors for the IPO market in the future.

“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market. An uptick in IPO activity may well intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors. Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the roll out of COVID-19 vaccinations.”

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