04 Aug UK domestic IPOs expected to rise following poor performances in the US
Following a year of volatile valuations across global capital markets, the UK is expecting an upturn of homegrown companies listing domestically with firms like Revolut, Monzo and Brewdog looking to go public between 2022 and 2023. As market fluctuations have created uncertainty for investors around the globe with indexes like the S&P 500 excluding foreign companies from their listings, US focused investors tend to sell-off non-essential foreign stocks first. Due to this, European companies – including the UK – have suffered average depreciations of up to 47%, 28% higher than if they were to list domestically, according to Dealogic. Chris Biggs, CEO and founder of Theta Global Advisors, states that whilst the IPO market does not sit in a perfect position, opportunities still exist in the UK for companies who are in a prime position to take advantage of them.
Businesses have endured challenging times recently caused by current macroeconomic conditions and because of this, investor appetite has decreased for IPOs. Biggs states however that by utilising astute advisors, as well as producing an experienced business plan, businesses have an opportunity to maximise their initial public offerings throughout 2022. There are several major IPOs in preparation that could be completed by the end of the year, including GlaxoSmithKline, AIG and Volkswagen planning a €20bn partial float of Porsche. These significant offerings have the ability to cause the IPO market to bounce-back and provide encouraging opportunities for investors. However, The Bank of England is expected to raise interest today from 1.25% to 1.75%, the highest level in nearly three decades as it tries to soften the impact of the rise in the cost of living.
The rise has affected the IPO market greatly – last year there were 1035 IPOs worldwide, which represented a new record. Global proceeds gained a record $608bn as activity surged and valuations were pushed higher by strong investor appetite for equity. However, the rising interest rates have severely dented that appetite, having a significant impact on the amount of IPOs this year and hindering companies’ plans. For a lot of the biggest names, an IPO remains the main objective, with some major firms, including Reddit and TPG planning their public debuts for several years now, but there are doubts they will proceed with their listings if worldwide markets continue to fade.
Chris Biggs, Partner at Theta Global Advisors – discusses the external factors affecting the IPO market:
“Rising interest rates have caused a significant shift in the UK IPO market. Moves must now be made to counter growing inflation and the recent rate rises are a significant step. Global inflationary pressures will grow considerably over the next few months, whilst growth in economies that are energy importers is likely to slow. Companies must consider the external business obstacles in great detail before considering an IPO.
“With major companies continuing with their public offering plans throughout the next quarter, the market looks set to rebound and provide several exciting opportunities for investors throughout the rest of 2022. By having astute advisors in place, companies have the opportunity to undergo a successful IPO, however, they must be fully prepared before considering a public offering and have a detailed plan in place.”
