Bankers lose hope of London IPO revival for another year
Banks have given up hope this year will bring a longawaited recovery in U.K. IPOs, as stock exchanges within the European Union and Switzerland have proved more tempting, senior bankers told Reuters.
London, which was Europe’s most popular listing venue in the 2021 boom, has attracted only 2% of all European IPOs since January, with Zurich and Frankfurt the busiest venues, Dealogic data showed.
Part of the reason is the sluggishness of Britain’s economic recovery and a perception its stock market is undervalued.
Bankers anticipate London will recover in 2025, when more private equityowned companies mature into IPOs and stock prices are expected to rise.
So far this year, U.K. IPOs have raised some $130 million, largely driven by Air Astana’s dual listing. That is a slight increase from this time last year but an 81% drop from the same period in 2022, Dealogic’s gures show.
“We’re likely to have a thin IPO market in the U.K. in 2024,” Tom Swerling, global head of equity capital markets (ECM) at Barclays told Reuters, adding that he saw a “reasonably healthy” pipeline of U.K. IPOs next year.
Tom Snowball, who oversees U.K. equity capital markets at BNP Paribas, also predicted limited London activity this year.
What there is would “likely (be) on the smaller end of the market,” although he said the bank was talking to clients about next year.
Mainland Europe, with Germany’s exception is experiencing stronger economic growth, has seen a series of deals in recent months after two years of little activity.
Companies, including Swiss skincare giant Galderma and French software provider Planisware, soared on their market debuts.
Private equity rm CVC and Spanish beauty group Puig are in the process of launching their multi-billion euro IPOs in Amsterdam and Madrid respectively.
Transatlantic pull
The reasons for London’s slower recovery include the stage of private equitybacked companies in the investment life-cycle.
At the same time, outªows from U.K. equities and the rival attraction of the larger U.S. market appear to have had a bigger impact on London.
Among those that have shifted to New York in search of heftier valuations and deeper liquidity are building materials group CRH and sports betting company Flutter.
U.K. authorities have proposed reforms, including simplifying oer prospectus rules.
The gap between U.S. and U.K. company valuations, meanwhile, has widened, Liad Meidar, managing partner at Gatemore Capital Management LLP, said.
“This means the cost of capital in U.K. equity markets is much higher than in rival markets so issuers pay more for their capital and have weaker currencies,” he told Reuters.
U.K. lags Europe
While most countries are lagging the U.S. economically, Britain has also lagged most of Europe.
Its economy is expected to grow 0.5% this year compared with 0.8% rise projected for the eurozone, the International Monetary Fund said this month. However, Britain’s gross domestic product is likely to rebound by 1.5% next year, according to the IMF. The impact of London’s last major listing CAB Payments last year when investors suered heavy losses did not help.
Some are upbeat still
Some are resolutely optimistic, however, including Charlie Walker, deputy CEO of the London Stock Exchange (LSE), who said new listings rules in the second half of 2024 should stoke market activity.
London remains ahead of continental bourses in terms of total equity capital raised beyond just IPOs, he added.