2017 could see a resurgence of the IPO (initial public offering) market as firms look to take advantage of global investor interest
The EU referendum result has compounded a slow 2016 for the UK IPO market, but the recovery in market pricing is likely to make IPOs an attractive option again for Scottish listed businesses, according to EY’s IPO Eye released today.
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 Q3 2015. There were two listings in the Main Market that raised £183.3m and four in AIM raising £42 million – a total of £225.3 million.
According to the Eye, 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 business that raised £3.4m) reflecting the international implications of the Brexit vote. The largest listing on the London Main Market was the operator of bowling centers, Hollywood Bowl Group plc, which was completed in the second half of September.
Newly listed stocks in Q3 2016 have outperformed veteran assets, which are currently trading at an average of 32% above list price.
Looking ahead higher valuations and lower volatility could see IPO activity pick up. According to the Eye, while a return to the record levels of 2014 may be a stretch, activity in 2017 could surpass 2015.
Mike Timmins, EY executive director in corporate finance, said: “The outlook for IPOs amongst Scottish 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.
“IPO is a clear route to market for companies, particularly in the technology sector. Tech businesses, which have strong representation in the central belt, see IPOs as a viable option to raise capital for their expansion plans.
“We could well see a resurgence of IPOs in 2017, as firms look to take advantage of global investor interest in the UK market.”
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