Market volatility after Brexit vote stifling interest in IPOs
PUBLISHED: 09:31 25 October 2016 | UPDATED: 09:31 25 October 2016
Brexit uncertainty has deterred firms from listing on the UK stock market, with the total value of initial public offerings (IPO) over the past three months falling to levels not seen since 2012.
Research released by Henderson Managed Investment Trusts shows a “dramatic decline” in both the number and value of firms that have successfully completed a stock market flotation in the wake of the EU referendum.
“Pre-referendum jitters have persisted,” the report said.
Of the 41 companies that have listed since January, only nine took place after the Brexit vote and only four were completed within the past three months.
It brings the total value of UK IPOs to £948 million in the third quarter, which marks a near-40% drop from the £1.6bn recorded during the same period last year.
Colin Hughes, a fund manager at Henderson Opportunities Trust, said: “The chilling effect of the Brexit vote noticeably cooled companies’ enthusiasm to list on the stock market, and we have yet to see IPO activity reheat despite market conditions settling somewhat.
“It’s actually surprising activity was not even quieter ahead of the vote, and that perhaps reflects the unexpected Leave result in the referendum.”
Fitness chain Pure Gym is the latest company to have scrapped plans for its stock market debut, citing “market volatility”.
The group had aimed to raise £190m from its IPO to help fund ambitious expansion plans.
Pure Gym chief executive Humphrey Cobbold said: “Given the challenging IPO market conditions, the board has decided not to proceed with a listing despite the strong interest shown by potential investors.
However, there could be some hope for the IPO market in the months ahead.
A recent report by accountancy giant EY claimed that UK stock market listings could bounce back after their summer slump.
EY said higher valuations and lower volatility could spark a pick-up in IPO activity going forward, adding that a return to the record levels of 2014 “may be a stretch”, but the number of IPOs throughout 2017 could surpass the 2015 total.
Investors are still awaiting the flotation of online banking software firm Misys, which stands to be the UK’s biggest IPO this year.
Misys - which provides software to the likes of Lloyds Banking Group, Barclays and HSBC as well as lenders worldwide - is planning to list in early November, just four years after it was taken private by Vista Equity Partners in a £1.3bn deal.
The group is hoping initially to raise around £500m and it is thought the group could be valued as high as £5.5bn when it floats.