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London competes for investor cash

Global markets are trying to attract IPOs and capital raisings following a volatile 2016
April 27, 2017

A lot has been said about the difficulties that companies attempting to list their shares publicly faced in 2016. Volatility and uncertainty are not the friends of an initial public offering (IPO) and the global political and economic turbulence of last year stunted share listings. In 2016, the worldwide number of IPOs fell to 1,167, from 1,307 the prior year.

However, 2017 has started to show signs of recovery. To date, 472 companies have listed their shares on stock markets around the world, raising $47.4bn in the process. This is compared with 260 and $18.7bn in the same period last year. Yet London does not seem to be sharing in that recovery.

While US and Chinese IPOs have risen sharply during the first three months of 2017, London listings are still thin on the ground. The main market has welcomed just 15 new companies, raising a total of £450m, compared with 13 and £1.1bn in the first quarter last year and 21 and £1.8bn in the same period in 2015. Of the global IPO volumes, the UK has claimed just 6 per cent.

  

UK IPOs versus US and China

 

It's easy to place the blame on Brexit. Misys and Brait, two large companies which were seeking FTSE floats towards the end of 2016, both cited the instability caused by the referendum as the reason for cancelling their plans. BGL - the owner of price comparison website Comparethemarket.com - has also pushed back its listing from the first quarter of the year to the final quarter.

But the London Stock Exchange (LSE) denies that the uncertainty caused by the UK's decision to leave the EU is still causing consternation for companies thinking about going public. A spokesperson from the LSE pointed to the four international companies which have chosen to raise money in the UK so far this year, stating that this "wider picture" was more reflective of the appetite for London fundraisings. Indeed, more money has been raised - via IPOs and capital raisings - on London's main market in total in the first quarter of 2017 than it was in the first three months of 2016. However, the £3bn raised so far this year is still a far cry from the £5.6bn total raised in the first quarter of 2014.

It is also worth noting that comparing London listings to the world's two largest economies is not entirely fair. The US has undergone a seismic shift in the past year and the country's new president, Donald Trump, is very keen on encouraging US business growth. His 'America First' incentives have helped spark a flurry of tech listings, including social media star Snap (US:SNA). Meanwhile, China's increased stability and the expectation of eased regulations have seen IPO numbers surge. Looking at the rest of the world, the UK is not in bad shape. It has overtaken Hong Kong and Japan to attract the third highest number of IPOs so far in 2017.

 

UK first-quarter IPOs from 2007 to 2017

 

To date, performance of the newly-listed companies on both the Alternative Investment Market (Aim) and the main market has been mixed. Just 10 out of 22 new floats are in positive territory in their first few months, with two specialist financial groups - Alpha FX (AFX) and Ramsdens (RFX) - leading the way, up about a fifth. Financials continued to make up the majority of new listings.

The LSE - alongside other global stock exchanges - is scrambling for a slice of what is expected to be the biggest IPO of all time. Saudi Arabia's oil giant Saudi Aramco is preparing to float 5 per cent of its shares at a value of $2tn and is currently in the process of deciding which global stock exchange will host its international listing. Xavier Rolet, the LSE's chief executive, recently travelled to Saudi Arabia with Theresa May in an attempt to woo the oil giant to British shores.

In March, it was reported that private equity group Blackstone had hired a group of banks and advisers to work on a potential IPO of its warehouse investment company, Logicor. The company owns more than 630 warehouses across 17 European countries and could be worth £10.6bn, which would make its IPO the largest in London since Glencore in 2011.