According to new research, funds raised by companies listed in London fell by more than 90% this year.
According to analysts, the market has cooled as a result of weak economic growth forecasts, rising interest rates, and concerns about the performance of British firms.
According to KPMG data released Wednesday, 40 companies have floated on the London Stock Exchange’s main and alternative investment markets this year. This is a decrease from 123 last year, but an increase from 38 in 2020. According to the study, total funds raised fell from £14.3 billion ($17.7 billion) to £1 billion.
It comes amid a broader slowdown in initial public offerings, which were down 45% year on year in the first three quarters globally, according to S&P Global.
According to figures provided to CNBC by market data firm PitchBook, the number of listings on European Union-based exchanges is down by a similar proportion to the United Kingdom this year, by around 66%.
However, London has yet to see a blockbuster IPO worth more than a billion pounds. Porsche raised a whopping 19.5 billion euros in the EU during its Frankfurt debut in September.
Previously published figures for the first nine months of the year place the annual decline in European funds raised at between 76% and 80%, indicating a less severe decline than the 93% in the United Kingdom.
The United Kingdom, like other economies, has seen inflation soar to a 41-year high and its central bank begin raising interest rates. However, it has also been rocked by political insecurity, bond market chaos, the ongoing trade and regulatory complexities of Brexit, and predictions of the longest recession on record.
“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,” said Svetlana Marriott, head of KPMG UK’s Capital Markets Advisory Group, regarding the figures published Wednesday.
Last year saw a record number of global IPOs, with European activity reaching a 10-year high.
According to Nalin Patel, lead analyst for EMEA Private Capital at PitchBook, companies “rushed to list last year to take advantage of conducive market conditions and pandemic-induced growth.”
However, by 2022, investors may have been wary due to the poor performance of several IPOs, according to Marriott.
Fintech firm Wise, delivery company Deliveroo, and shoemaker Dr Martens are all significantly lower on their listing prices for their London debuts in 2021. Darktrace, a cybersecurity company, has also fallen out of a post-IPO rally.
In December 2021, British regulators implemented a set of reforms aimed at addressing long-standing criticisms. According to the opinions expressed in a government report, the UK stock market misunderstands and undervalues innovative tech firms, is dominated by “old economy” companies rather than forward-thinking ones, and is increasingly losing business to Amsterdam and Paris.
The reforms included allowing companies listed on the main market to have a dual class share structure (intended to attract more founder-led firms), reducing the number of free floating shares required, and increasing the minimum market capitalization for ordinary commercial companies on its main and standard segments from £700,000 to £30 million.
Since then, market trends have been influenced more by global forces than by regulatory action. According to Marriott, the best-performing sector in the United Kingdom was energy and natural resources, which accounted for 20 IPOs.
“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,” she said.
“We expect public listings to remain muted in 2022,” said PitchBook’s Nalin Patel. “However, companies in the energy sector may look to benefit from increased focus as well as profits and seek an exit.”
(Adapted from CNBC.com)