2015 was a good year for the IPO market but marked a slowdown from 2014. In the UK, fewer companies listed and less market value was added over the year despite some “mega-listings’ including World Pay and Auto Trader.
According to London Stock Exchange data there were 92 IPOs adding £26.8bn in market value in the UK during 2015, that’s down from the 137 and £39.9bn in 2014.
The year for UK IPOs had a strong start and finish with a couple of wobbles in the middle. The chart below shows a slowdown in listings in the run up to the general election on May 7. May, the month of the general election was actually the second best month of the year for IPOs as companies flocked back to the primary market after the traditionally more market-friendly Conservatives swung to a surprise victory.
The slowest months for IPOs by far were August and September with a number of companies delaying or outright cancelling slated plans to go public after equity benchmark indices plunged over fears surrounding China’s currency and economy.
Source: London Stock Exchange, CMC Markets, Janaury 2015
With China issues ongoing, the Federal Reserve reigning in monetary stimulus, the potential for the Bank of England to follow suit and a possible early Brexit vote; further sources of uncertainty could make 2016 even more stop-start for IPO's than 2015.
2015 was a good one for IPO deal volumes in general but the results have been more uneven for investors. Overall, just over half of UK IPOs ended above their listing price in 2015. Out of the top ten listings by capital raised, nine generated positve returns. Then
Out of the largest most popular offerings, only World Pay, Auto Trader and more recently Wizz Air, as of December 21st, are above their listing price. In the chart below it can be seen that most of the largest newly listed shares look set to finish the year lower alongside the FTSE 100. The other companies charted are Sophos, Hastings, Shawbrook, Aldermore and John Laing.
Source: CMC Markets, December 2015
World Pay, by far the best performing IPO of 2015 has been upgraded from the FTSE 250 to the FTSE 100, though investors should be cautious as the last company that saw a swift jump into the FTSE100 was Royal Mail and since that day the shares have headed south.
The outperformance of the biggest UK IPOs in 2015 could make investors a lot more selective in 2016. A more selective primary market investor could lead to another annual decline in the number of companies choosing to go public if corporate boards believe the demand from shareholders is not there. It could also mean the value added to the stock market from IPOs in 2016 could be dominated by an even smaller number of ‘mega-listings.’
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