Brighter outlook for Scottish IPOs

Initial Public Offerings (IPOs) of Scottish companies are facing better prospects after the EU referendum according to assurance, tax, transaction and advisory firm EY.

An IPO is when the stock of a private company is offered to the public the first time.

EY said the EU referendum result compounded the slow 2016 for the UK IPO market.

The recovery in market pricing is likely to make IPOs an attractive option again for Scottish listed businesses, EY’s IPO Eye stated.

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 last year.

Two listings in the Main Market raised £183.3m and four in the Alternative Investment Market raised £42m – a total of £225.3m.

Of the six IPOs that were priced and started trading this quarter, only one was a foreign business, reflecting the international implications of the Brexit vote.

The largest listing on the London Main Market was bowling centre operator Hollywood Bowl Group plc, which was completed in the second half of September.

Newly listed stocks in Q3 2016 outperformed veteran assets, trading at an average of 32% above list price.

Higher valuations and lower volatility could see IPO activity pick up, and EY said activity next year 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.”

Mike Timmins said IPOs can help tech companies raise capital for expansion.