London Stock Exchange saw slow start to 2022 because of geopolitical uncertainty

The London Stock Exchange experienced a slow start to 2022, with 19 issuers raising £397m in the first quarter of 2022. In the North, AIM Activity raised £30mn in funds, with a listing from Doncaster-based Clean Power Hydrogen Plc.

The main market saw 12 IPOs which raised £308m whilst the Alternative Investment Market (AIM) saw seven admissions in the first quarter of 2022, raising £89m. The largest main market IPO in Q1 was New Energy One Acquisition Corp Plc which raised £175m and the largest AIM admission was Clean Power Hydrogen plc which raised £30m.

Listing activity during the first three months of 2022 is in stark contrast to the same period in 2021 when there were 12 IPOs on the main market and two on AIM, which raised a combined total of £5.6bn – a value 14 times higher than this year’s opening quarter.

Mark Clephan, North Corporate Finance Partner, comments: “The London IPO market has experienced a difficult start to 2022. There are strong headwinds as a result of the war in Ukraine, high energy and commodity prices alongside inflationary pressures and associated interest rates rises which are ultimately creating uncertainty for the future cash flows of businesses looking to float.

“These pressures combined with supply chain issues are likely to lead to a continuation of the weaker market in Q2 2022. We will hopefully see a return to a stronger equity market later in the year, although this remains at risk given the uncertain geopolitical and macroeconomic landscape.”

Global IPO activity has continued at a pace

Global IPO markets saw 321 IPOs in Q1 2022, raising $54.4bn. This is 37% lower in terms of the number of IPOs and a 51% decline in terms of proceeds compared to Q1 2021. The decreases are not unexpected when compared to 2021 which was the most active Q1 in the last 21 years.

As with the UK market, geopolitical tensions, commodity and energy prices rises and inflation and associated interest rate rises led to a reduction in the number of IPOs.

Energy IPOs led the way in terms of proceeds, with $12.2bn raised in total.  Technology and life science IPOs, which had been the key growth area in recent years, saw a marked decline, with a combined 107 IPOs in Q1 2022 compared to 220 in the first quarter of 2021. This was in part due to the disappointing post-IPO performance which has led to a change in investor sentiment in these sectors.

Shanghai was the leading global exchange in terms of proceeds, hosting 37 IPOs and raising over $18.3bn in the process. Combined with the Shenzhen exchange, China witnessed 24.3% of global IPOs by number and 51.7% by proceeds. NASDAQ, which was most prevalent market in 2021, saw a marked decline with only 23 IPOs in Q1 2021 compared to 73 in the equivalent quarter in 2021, demonstrating a reduction in the number of technology IPOs. The largest IPO globally in the quarter was LG Energy Solution Ltd which raised $10.7bn on its listing in Korea (KRX).

Helen Pratten, EY Strategy and Transactions Partner, concluded: “The record-breaking IPO market in 2021 was always going to be difficult to follow, and unfortunately, the markets have been hit by a maelstrom of adverse factors.

“Technology stocks, previously the driving force, have seen a reduction in share prices and hence a weakening in investor sentiment. The market is cyclical, and it is hoped that activity will return later in the year, but in the short-term IPO-bound companies should remain alert to the right window to move, whilst retaining focus on driving their equity story so they remain an attractive option when markets open.”

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