Don’t take your company public just before a market stumble. That’s the lesson management at Funding Circle (FCH) and Aston Martin (AML) are likely to have taken from their IPOs in the first week of October – the week in which the FTSE All-Share fell 3.5 per cent, only to be eclipsed by a 4.4 per cent tumble in October’s second week. The two companies are down 10 per cent and 19 per cent, respectively, on their IPO share prices, which had already been discounted in the run-up to launch.
Recent stock market jitters have not been kind to the FTSE’s newest companies. Only one of the seven companies that listed on the main market in the third quarter of 2018 has grown since its IPO and, on average, these companies have reported a 23 per cent share price fall (compared with a flat wider market). The Alternative Investment Market (Aim) has fared little better. As of 16 October, the 27 companies to have listed on the junior market in 2018 have reported a 4 per cent average share price increase. In June, new IPOs were up 24 per cent.
Perceived market weakness is a deterrent for companies that are thinking of going public. In 2008, the US markets only welcomed 31 new companies (compared with an average of 171 between 2000 and 2017), while “ongoing geopolitical uncertainties and trade issues” have sent global IPOs down 18 per cent in the first nine months of 2018, compared with the same period last year, according to EY.