The London IPO market saw a mixed start to the year. The Main Market saw a reduction in deal count and funds raised when compared with the same period last year but the total market capitalisation of companies floating in the quarter increased by 60%. However, with five of the eight Q1 Main Market listings consisting of investment companies, this does not necessarily herald a buoyant corporate IPO environment. In contrast, the AIM market saw a year-on-year increase across all three metrics, albeit compared to a relatively weak first quarter last year.
The less than stellar performance during the quarter came at the same time as both the FTSE 100 and 250 indices retreated from all-time highs in early January, suffering peak to trough falls of up to 11.5% and 8.5% respectively through the quarter.
Uncertain months ahead
Weaker than expected market conditions and increasing uncertainty have seen the expected rush of Q2 IPOs delayed to Q3 or later, although recovery in the main indices through April may well see some timetables accelerated. We are seeing strong appetite from issuers preparing for an IPO, but whether these aspirations are achievable or not in the near term remains to be seen.
While May has already seen the completion of the two largest IPOs of 2018, we are yet to understand the impact on the short-term outlook. Vivo Energy plc listed on the London and Johannesburg stock exchanges, pricing in the middle of the range and showing reasonable gains in the first days of trading, however, this was quickly followed by Avast PLC pricing their IPO on 10 May at the bottom of the range, and immediately trading at a slight discount to the offer price.
The Vivo Energy transaction is not only one of the largest UK IPOs of 2018 to date, but also the largest African focussed IPO since 2005. At Link, we are proud to support Vivo Energy in both the UK and South Africa, deploying our joint IPO capabilities for the first time since the enlarged Link Group was formed in November 2017. Looking further ahead, Brexit continues to provide the backing music to the financial markets. Will Brexit stifle IPO markets in Q4 as investors and issuers prepare for a brave new world outside of the EU? With so much detail on the UK’s future relationship with the bloc unknown, it is hard to say. Perhaps AIM and the smaller end of the market offers more hope for a strong finish to 2018, with UK growth companies perhaps targeting a predominantly UK investor base who are less affected by political and diplomatic cross winds.