UK IPO values sink this year, but there’s hope for 2023

New analysis from KPMG UK's Capital Markets Advisory Group reveals that UK IPO values are down, but the outlook for 2023 isn't so gloomy.

New analysis from KPMG UK's Capital Markets Advisory Group reveals that UK IPO values

The amount of money raised by companies joining the London Stock Exchange has fallen by more than 90 percent in 2022 so far, when compared to the same period in 2021, according to new analysis by KPMG UK’s Capital Markets Advisory Group.

The drop in the total amount of funds raised via IPOs this year - from £14.3 billion in 2021 to £1 billion in 2022 (93 percent) - reflects ongoing uncertainty and market volatility. In volume, a total of 40 companies have come to the London market so far in 2022 – a 67 percent decrease on the previous year (123), and a five percent increase on 2020 (38).

Svetlana Marriott, Partner and Head of KPMG UK’s Capital Markets Advisory Group, said: “The flood of IPOs that we saw in 2021 became more of a drought this year, as adverse macro conditions and a sense of investor fatigue made for a perfect storm, ultimately closing IPO markets in the UK and globally throughout 2022. But the forecast for next year may not be quite as stormy, as we see many already preparing to launch once more stable economic conditions return.

“While the total funds raised this year are the lowest we’ve seen for some time, this isn’t a complete surprise given the record high levels of inflation, rising interest rates, geopolitical uncertainty, fears of a recession, and investors taking caution following the poor performance of several IPOs. The IPO market has always been sensitive to volatility. However, companies in the Energy and Natural Resources sector weathered the storm better than others, with 20 IPOs of businesses in this sector, just over half of which focused on renewables.”

Although Class 1 transactions followed a similar trajectory to IPO activity levels by volume, falling by 31 percent from 31 in 2021 to 15 in 2022, the value of transactions increased to £40.3 billion this year, from £34.7 billion in 2021.

Svetlana added: “Despite challenging market conditions, six of the 15 Class 1 transactions this year exceeded £1 billion, with the largest being the demerger of Haleon by GSK at £31 billion. As a result, the Healthcare sector continues its strong track record of leading the Class 1 transactions market by deal size, and the Energy and Natural Resources sector wasn’t far behind.”

Picking up on the sector angle, Linda Main, Partner and Chair of KPMG UK’s Capital Markets Advisory Group, said: “It is no surprise that Energy and Natural Resources companies held the strongest appeal to investors during the year - raising £675 million, particularly given the continuous march of the ESG and decarbonisation agenda, along with energy security concerns coming to the fore.

“Elsewhere, the Financial Services sector also performed relatively strongly, raising £282 million in a generally weak year. This was driven by several SPAC IPOs including Financials Acquisition Corp and Hiro Metaverse. Conversely all other sectors struggled, with the Retail and Consumer sector recording only one IPO during the year raising £1 million, reflecting the challenging economic environment for many households in the UK.”

Further Issue fund raises also experienced a reduction year-on-year, falling 66 percent from £26 billion in 2021 to £8.7 billion in 2022.

Svetlana explained: “While the decrease in further issuances in 2022 is significant, it also reflects an element of correction, as 2021 saw record levels as companies sought to navigate the challenges presented by the pandemic. As a result, many entered 2022 with well capitalised balance sheets.”

Svetlana concluded: “For companies considering a listing, preparation is crucial to ensure they can be in a position to launch quickly once market conditions improve, and a number of companies are already readying themselves for next year in anticipation. In the longer-term we expect that the IPO pipeline will return to a healthier state once signs of stability begin to show, as the market tends to reopen fairly quickly. This, coupled with encouraging signs that activity levels will start to return suggests that the outlook for 2023 is one of cautious optimism.”


Link to report here

Sources used:

UK IPO data and further issues: Primary markets New issues and IPOs Reports | London Stock Exchange

The data was extracted from the above LSE website for both “New issues and IPOs” and “Further Issues”, which were both filtered for the date range 01/01/2020-30/11/2022

• IPOs have been classified as per LSE criteria, reflecting “New Company Placings” only;
• IPO funds raised are based on Total Funds Raised (including new and already issued shares);
• IPO sectors were categorised by KPMG based on FTSE Sector and Subsector characteristics;
• Further Issue volume numbers exclude any equity issues where no funds were raised;
• Aftermarket performance was calculated as the variance between the Issue Price per the LSE data set above, and the closing share price as at 30/11/2022 as per Yahoo Finance.

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