Optimisism high as firms set to dust off IPO plans after slow year so far

The EU referendum result has compounded a so far slow 2016 for the UK IPO market, but the recovery in market pricing is likely to make IPOs an attractive option again for Yorkshire businesses, according to professional services firm EY’s IPO Eye, released today.

David Buckley, partner and IPO leader at EY in Yorkshire, said: “The outlook for IPOs amongst Northern businesses looks increasingly bright, buoyed by the markets’ strong recovery and the added interest of international investors looking to take advantage of the weaker pound.

“We could well see a resurgence of IPOs in 2017, as firms look to take advantage of global investor interest in the UK market.”

In the third quarter of 2016 there were a total of six listings, down from 13 in the previous quarter, but at the same level as in the third quarter of 2015.

There were two listings on the main market that raised £183.3m and four on AIM raising £42m – a total of £225.3m.

According to the report, of the six IPOs that were priced and started trading this quarter, only one was a foreign business, SEC SpA, an Italian media and entertainment concern that raised £3.4m, reflecting the international implications of the Brexit vote.

A report released by professional services firm PwC last week also noted a drop in the number of new listings on the London stock market as a result of the Brexit vote, highlighting that there were no main market IPOs above £5m in the 13 weeks following the referendum.

The largest listing on the London main market was the operator of bowling centres, Hollywood Bowl Group plc, which was completed in the second half of September.

Newly listed stocks in the third quarter of 2016 have outperformed veteran assets, which are currently trading at an average of 32 per cent above list price.

While UK IPO activity was at the same level as the third quarter in 2015, the capital raised increased by 18 per cent.

Looking ahead higher valuations and lower volatility could see IPO activity pick up, the report said.

While a return to the record levels of 2014 “may be a stretch”, activity in 2017 could surpass 2015, according to EY’s report.

Scott McCubbin, EY’s IPO leader for UK and Ireland, said: “Following the markets’ strong recovery and the added interest of US and Asian investors looking to take advantage of the weak pound, we now expect a number of firms to dust off their IPO plans.”

He suggested that retail, technology, media and entertainment companies are likely to attract the most investor interest.

The second quarter of this year saw a total of 18 IPOs, four on the main market and 14 on AIM, raising £803.6m. Compared with second quarter in 2015, deal numbers in second quarter in 2016 were the same, but capital raised fell 65 per cent. In that period AIM outperformed the main market in both volume of IPOs and capital raised in a quarter for the first time since 2012.

Leeds-based fitness chain Pure Gym unveiled plans for it to float on the stock market last month.

The group is aiming to raise £190m from its initial public offering (IPO) to further seal its position as the biggest gym group in the UK’s £4.4bn health and fitness market. Another Leeds-based company that could launch an IPO is Sky Betting & Gaming, according to a report in the Sunday Telegraph in September. The report claimed the firm could make a £1.5bn stock market debut next year. However, Sky Bet stressed that no decisions have been made about a possible flotation.

Waste management firm Biffa and GoCompare both recently announced plans to go public.