EY (Ernst & Young) Is predicting a flat year for London IPOs after the City got off to its slowest start for new listings in a decade. Only £397 million was raised by companies newly listing on either the main London Stock Exchange or junior AIM market compared to £5.66 billion a year earlier.
2012 was the last time London had a slower first quarter for IPOs and fresh equity capital raised. The slump is put down to a combination of Russia’s invasion of Ukraine and higher levels of inflation than seen in decades. Conditions have worried investors and caused significant stock market volatility which has put companies off new equity capital raises.
EY’s IPO leader for the UK and Ireland Scott McCubbin also doesn’t see the outlook for new flotations improving much over the next several months, commenting:
“There are strong headwinds as a result of the war in Ukraine, high energy and commodity prices, inflationary pressures and associated interest rates rises, which are ultimately creating uncertainty for the future cashflows of businesses looking to float.”
“These pressures combined with supply chain issues are likely to lead to a continuation of the weaker market in the second quarter of 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.”
2021 was a boom year for new IPOs after many companies had delayed listings the year before due to the impact and uncertainty caused by the Covid-19 pandemic. The trade deal agreed between the UK and European Union in December 2020 also boosted confidence by removing uncertainty, convincing numerous companies to take the plunge with a public listing.
Takeaway delivery app company Deliveroo, cybersecurity firm Darktrace, private equity firm Bridgepoint and Dr Martens of black, leather boots fame were among the stream of companies to launch IPOs and list on the London Stock Exchange last year.
However, many of the newly listed firms also struggled during their first months as public companies last year. Darktrace is up 75% since its IPO but Dr Martens is down 35%, Bridgepoint 5% and Deliveroo 61%.
London isn’t the only stock exchange to suffer from a reluctance from companies to brave a 2022 IPO. Around the world, equity capital raised from new listings has more than halved to $54.4 billion compared to the first quarter of 2021.