The largest IPO listing of 2018 in the final quarter wasn’t enough to overcome a fall in IPO activity as companies weighed up Brexit uncertainty, according to EY’s latest IPO Eye report.
2018 saw a total of 79 IPOs listing in London – 44 on the Main Market and 35 on AIM – raising £9.5bn. This compares with 95 IPOs listing in 2017 raising £12.4bn – 51 on the Main Market and 44 on AIM.
Q4 2018 alone accounted for £4.4bn in proceeds – 46% of the amount raised in the whole of 2018. There were 25 IPOs – 19 IPOs on the Main Market and 6 IPOs on AIM. The 19 Main Market listings was also the highest number since Q2 2014. Total listings were slightly down on Q4 2017, which saw 30 IPOs (16 on AIM and 14 on the Main Market) raising £5.1bn.
Aston Martin was the largest IPO to list last year, raising £1.1bn of capital and three of the top four IPOs by capital raised in 2018 were backed by private equity. This was followed by Smithson Investment Trust which raised £823m, the largest proceeds ever raised by a fund in London. 2018 also saw twenty-one international companies list in London raising £3.2bn – demonstrating it remains an important market for international companies, with more international IPOs than all other major European exchanges combined.
The post-IPO performance in Q4 of those listing has been steady. First-day returns on Main Market stock were on average 7% above offer price, and at the year-end 43 out of 79 companies which listed in the year were trading above their offer price.
By sector, financial services led the way in 2018, with a 53% share of UK IPOs, ahead of software (11%) and support services (8%). Financials was also the leading sector by proceeds, accounting for 52% of funds raised, ahead of automobiles (11%) and software (11%).
Scott McCubbin, EY’s IPO Leader, commented: “Despite a fall in IPO activity, 2018 was still an encouraging year for the market as it showed resilience in the ongoing geo-political uncertainty and market volatility. The year finished with a flourish as the final quarter produced the highest number of Main Market listings in four years which could be an indication that issuers had brought forward IPOs from 2019.
“Although some post-listing performances may have brought about cause for concern, overall the picture is brighter with only two of the last quarter’s listings trading below offer price on the first day.
Scott concluded: “We expect Q1 2019 to be more subdued than normal as companies await the outcome of Brexit negotiations meaning activity is likely to be weighted towards the second half of the year. Activity may be further tempered by the slowdown in Global growth that is beginning to impact markets and the wider economic outlook for 2019. We also expect pricing pressure to increase as cautious investors look to drive a hard bargain so issuers will need to have robust equity stories and be well prepared to enable them to transact.”