Competition for investment is set to accentuate after the UK markets closed this past year with a flourish of activity, that is predicted to continue in 2021, based on EY’s latest market tracker IPO Eye.
After a subdued first half in 2021, Q3 saw the re-emergence of IPO activity, followed by a significant uptick in Q4. In the final quarter of the season, the main market had 17 IPOs raising £3.4bn (together with a single issuance under the London Shanghai Stock Connect program raising £155m), compared with three in Q3 raising £3.3bn. Activity also accelerated on AIM with 10 IPOs in the quarter raising £192m, compared with three in Q3 raising £76m.
In total, 40 IPOs indexed by the UK in 2021 – 25 around the Main Market (including three via the London Shanghai Stock Connect program) and 15 on AIM – an overall total increase of 11% when compared to 2021 (36 listings). This brings total funds raised through IPOs last year – on both markets and all routes – to £9.4bn, representing a year-on-year increase of 31% from £7.2bn.
At no more 2021, the UK maintained its third position behind the united states and Chinese markets for funds raised, in the final quarter and in the full year to date. In addition, more than 40% of total capital raised by commercial companies in Europe in 2021 through IPOs was on the UK markets, demonstrating the continued preeminence of the market in Europe. Technology IPOs raised more than 25% of the total funds raised in 2021, no doubt fuelled by the impact of COVID-19, contributing largely to promote activity in London.
Follow-on activity was again strong in Q4 2021 with existing issuers raising circa £15bn, bringing the annual total to over £40bn – the largest total since 2009 in the aftermath of the financial crisis. Despite the return of lockdown restrictions, hunger for IPOs is predicted to increase through 2021, even though this may have the effect of pushing some IPOs to later in the year.
Dan Salt, a director and head from the M&A team at EY in Birmingham, said: “Building on the momentum that we saw in Q3, the UK markets have successfully weathered the difficulties brought by COVID-19 and have bounced back in the final quarter of 2021. In addition to IPOs, the markets have successfully supported existing issuers through some of the most difficult economic times in the recent past, with more follow-on capital raised in the year since 2009.
“It’s also promising to see 25% of total funds raised in 2021 related to technology IPOs. These are likely to become increasingly prominent with FinTech, Tech and BioTech sectors expected to be key growth sectors for that IPO market in the future.
“Looking to the year ahead, we can expect 2021 to become a very strong year for the UK IPO market. An uptick in IPO activity might intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors. Confidence continues to build with the Brexit deal now giving clarity round the future relationship with Europe and also the roll out of COVID-19 vaccinations.”
Global IPO activity has continued at a pace
Mirroring the activity seen in the UK, global IPO activity continued at a pace following COVID-19 restrictions earlier around. Preliminary findings from the EY Global IPO trends report (because of be published on January 20, 2021) reveal that in Q4, exchanges witnessed just under 500 deals with more than $100bn of proceeds. In the full year, exchanges around the world posted over 1,350 IPOs with proceeds totaling over US$250bn – 19% and 29% higher, respectively, than 2021.
The Nasdaq led the way in which in terms of proceeds for the twelve month, driven by significant US technology IPOs. When it comes to overall deal volumes, the Shanghai exchanges were within the lead.
Helen Pratten, Strategy and Transactions Partner concluded: “IPO pipelines are healthy and because of the performance in the second half of 2021, we're expecting a busy first half and beyond for that capital markets. No doubt there will be challenges ahead in 2021 but the markets in 2021 have been resilient to the continuing COVID-19 situation and while there is a new strain, vaccines are already in roll-out.”