UK IPO activity is expected to almost grind to a halt over the next 12 months as the slowdown seen this year intensifies amid uncertainty over the economic outlook after the Brexit vote, according to research published today.
The IPO Eye study by accountancy firm EY found that in the second quarter there were 13 listings in total, comprising four on London’s Main Market and nine on AIM raising a combined £553 million.
That was just 30 per cent of the capital raised the previous quarter, when there were 15 listings, and 52 per cent lower than in the second quarter of 2015. EY said investor confidence seemed to drop as the EU referendum approached, hitting both the volume and pricing of IPOs, but all in all newly listed stock in the second quarter was “still a strong 20.5 per cent above list price on average, with only two stocks trading below their list price”.
Scott McCubbin, EY’s IPO leader for UK and Ireland, said: “Raising capital is likely to be more difficult in this environment. IPO activity was already slow across the UK due to a wide range of economic and political uncertainties. Following the result of the EU referendum we expect UK IPO activity to slide further to a near-standstill in the next 12 months as investors absorb and process the changes to the UK economic landscape.”
The report also found that some businesses that could have listed as soon as the fourth quarter of this year “are now expected to put their plans on hold until there is a more certain economic and political outlook in the UK”.
McCubbin added: “One area of increased activity however, could be from US and EU private equity funds looking to acquire assets in the UK, particularly if there is an impact on business valuations and a lower pound. Companies will want to see clear signs of certainty and long-term planning if London’s Main Market and AIM are to remain major listing destinations. If these conditions are not in place soon, there is a risk that some companies may start exploring alternative markets like the US.”
Clydesdale Bank launched its delayed listing in February, pricing the shares at the lower end of a range of 175p to 235p amid factors including concern over a possible Brexit.