New stock market plans could stimulate Midlands IPOs – PwC
PLANS by the London Stock Exchange to introduce a new High Growth Segment for companies seeking equity investment to fund their growth plans could spark a revival in the region’s IPO market, analysts have said.
The High Growth Segment is intended to incentivise fast-growing corporates to make an Initial Public Offering (IPO) or listing on the LSE as an alternative to seeking bank finance or other sources of finance.
Under current proposals, which are due to be introduced later this month, the draft rules state that business owners will only have to relinquish 10% of the value of their shareholding when listing for the first time, instead of the usual 25% or more on the main market of the LSE.
In addition, in order to float a company on the LSE via the High Growth Segment, corporates would have to meet certain qualifying criteria, which includes the publication of a prospectus and the ability to demonstrate revenue growth of at least 20% year-on-year for the last three years. They must also be incorporated in the European Economic Area and raise at least £30m as part of the flotation.
There has been little IPO activity in the West Midlands since the onset of the credit crunch, but PwC said there were now a significant number of corporates in the region prepared to consider such a move.
Sophie Rooke, capital markets director at PwC in the Midlands, said: “This is an exciting development that could help to inject life back into the IPO marketplace by creating an opportunity for fast-growth corporates in the region to raise finance on the main market. Equity finance is benefiting from growing investor interest and achieving a listing means businesses can go back to the market to raise more funds as and when they are needed.”
PwC’s latest IPO Watch for Q4 2012 has revealed a more optimistic outlook for Europe’s IPO market, with amounts raised on IPO showing a seven-fold increase compared to the same quarter in the previous year.
Since the start of 2013, there has been an increase in IPO activity with a number of companies announcing their intention to float. These include Countrywide, which has a large call centre at Sherwood Business Park in Nottingham and Hellermann Tyton, which has a distribution centre in Walsall.
“The introduction of the High Growth Segment should help to ensure that the LSE remains an attractive and competitive financial marketplace for dynamic corporates that are already achieving good growth. It may well encourage some of them to list for first time and benefit from the investor interest that typically accompanies new market entrants,” added Ms Rooke.
