"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."
Just 32 companies listed on the main market and AIM in the first half of 2016, down by 14% compared to the same period a year ago.
The value of companies listing has also fallen to its lowest level in four years. In total, just nine IPOs have taken place since the referendum, with only four of these on the main market in the last three months. As a result, the total value of IPOs on the main market and AIM in the third quarter (£948m) is the lowest quarterly total since 2012, down 42% from a year ago.
This means total the value of IPOs in the first nine months of the year amounted to just £9.9bn, down 16% from the same period a year ago, and the lowest level since 2012, when investor confidence was heavily hit by a slowing economy, and fears of a double dip recession. High profile IPOs were pulled this year, among them food distributor Brakes Group, which opted to wait for better market conditions, and most recently, Pure Gym.
However while the main market has seen just 12 IPOs this year, AIM has enjoyed more than twice that number. Although the value of companies listing on AIM is dwarfed by that of those on the main market (typically one eighth the value), the £2.3bn total value of companies listing on AIM in 2016 so far is up 47% on the same period a year ago, providing a bright spot for investors.
Financials accounted for 51% of the value of companies that listed in 2016, with Metro Bank, and the Clydesdale and Yorkshire Banking Group the largest this year, both valued at £1.8bn.
Colin Hughes of Henderson Opportunities Trust, commented: “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. It’s not necessarily bad for investors in the short term – it means it’s a buyers’ market: new listings have to compete for investor cash and that means keener prices.
“AIM has bucked the trend, seeing solid annual growth in both the number of listings, and their total value this year. These smaller companies are typically less sensitive to market conditions. Owners are usually looking for additional capital and strategic shareholders to support growth, making them less price sensitive than a main market listing more likely to have private equity owners who want the best valuation for their stock; moreover, smaller companies tend to see more collaboration with fund managers in the book building process – they often won’t have direct listed competitors, so finding the right valuation is not just a question of comparing against the valuation of similar listed companies.
“New listings play a crucial long-term role in our financial system. They allow entrepreneurs to realise cash from companies they have built, and to access deep pools of additional capital to drive growth. They replace companies that have been de-listed or acquired, or which have simply gone into decline at the end of their life-cycle. For pension funds, insurance companies, and private investors alike they provide new options, either for growth, or to diversify portfolios, or both."
