Initial public offering (IPO) enthusiasts will need a new hobby for next year. Listings in London are slowing down. Brexit and market volatility have left commentators looking under the sofa for IPOs. Some companies have ploughed ahead with their plans – investment platform AJ Bell’s listing got off to a very strong start last week. But broadly speaking, this is not a good time to go public.
Looking backwards doesn’t reveal much, as there’s no meaningful trend in recent IPO activity. According to the London Stock Exchange, there have been 80 listings in the year to November. It is extremely unlikely that there will have been enough IPOs in December to take us up to the 107 companies that listed in 2017. Then again, only 67 companies listed at all in 2016 – perhaps for similar reasons as now.
Brexit has already had an impact, according to Sue Noffke, UK equities fund manager at Schroders. “Investors have indiscriminately shunned UK stocks as a consequence of Brexit,” she says. Before the 2016 European Union (EU) referendum, investors were prepared to pay around 15 times the UK stock market’s expected aggregate earnings for the year ahead. Today, this sits at around 13 times, compared to the global stock market, which trades around 15 times forecast 2018 aggregate earnings, she says. IT stocks, in particular, offer a healthy discount to global markets, according to Citi data, trading at around 14 and 19 times forward earnings respectively.