London IPO activity plunges as market volatility halts listings boom

The amount of cash raised via initial public offerings in London plunged in the first half of the year as companies pulled out of public markets amid extreme volatility and historic levels of inflation, new data has revealed.

Based on data from four major EY firms.

London’s main market saw just six IPOs in the second quarter, raising £192m in total, while the Alternative Investment Market (AIM) saw one admission which raised £6m.

The data underscores a torrid semester for equity markets as a cocktail of inflationary pressures, war in Ukraine and rising interest rates push investors and companies out of public markets.

‘Perfect storm’

Scott McCubbin, EY UKI’s IPO manager, said the start of 2022 had been “very challenging” for the city’s IPO market.

“There is a perfect storm of geopolitical pressure creating a challenging macroeconomic landscape, which is compounded by inflationary pressures centered on high energy and commodity prices, leading to associated interest rate hikes,” a- he declared.

“We expect a weak IPO market for the remainder of 2022 due to these challenging conditions.”

He added that the pipeline of companies looking to enter the UK market remained “healthy” however, as a number of companies are delaying IPOs due to market turbulence.

“This offers a more positive medium to long-term outlook, although the timing of a rebound is difficult to predict given the uncertain geopolitical and macroeconomic landscape,” he added.

The slowdown in IPOs has proved a speed bump in ministers’ plans to promote the capital as a top hub for IPOs, following a major review of listing rules on the UK led by Lord Hill last year.

The government and London Stock Exchange bosses have taken a number of steps over the past 12 months to boost the attractiveness of London’s public markets, including the introduction of dual-class share structures and plans to to remove the current premium and standard listing segments.

Global slowdown

Fears of a permanent slowdown in London will, however, be tempered by a broader global slump in IPO activity, with all markets seeing 630 IPOs worth a cumulative $95.4 billion over the past six months. first months of the year – a 58% drop in valuation from 2021 and 46 percent lower in terms of flotation numbers.

Global energy IPOs led the way globally in revenue, with $27.9 billion raised – more than any other sector. IPOs in technology and life sciences, which had been a major growth driver in recent years, saw a sharp decline, with 197 IPOs compared to 504 in the first half of 2021.

Debbie O’Hanlon, EY UKI Private Leader, said the slump in tech stocks in the first half of the year sabotaged a number of planned tech listings.

“Previous driving forces for technology and life sciences stocks have seen share price reductions, leading to weaker investor sentiment,” she said.

“These sectors have been supplanted by the energy market as the top sector for global IPOs.”