Reported in the financial pages of a Sunday newspaper recently was a report commissioned by Dealogic which showed that 34 companies have floated on either the London Stock Exchange or its AIM junior market this year. The total value of those flotations or initial public offerings (IPOs) was £4.9 billion. This compares with last year where just 12 companies floated in London, in deals worth a combined total of £1.1 billion (And this compares to 2007, the last full year before the financial crisis, where 57 companies floated in London in deals worth a combined total of about £7 billion).
Other research, from one of the largest firms of accountants, showed that by the end of 2009, the number of companies listed on AIM had fallen from a peak of 1,694 in December 2007, to below 1,300. Yet the number of delistings in 2009 was 293 and not significantly higher than in 2008, when 259 companies delisted. While cautious investors were reluctant to support new offerings, secondary fund-raisings - funds raised by companies already listed on the market - increased from £3.2 billion in 2008, to £4.8 billion in 2009.
The encouraging increase in the number of IPOs this year shows that firms are looking to grow by tapping investors for funds – a healthy sign for the wider economy which really needs a greater contribution from the private sector.
The recovery in the IPO market in the UK is echoed around the world, according to Dealogic’s data. The firm found that since January 857 companies across the globe have staged an IPO in deals worth a total of £92 billion. Last year, 593 companies globally floated on stock exchanges, raising a total of £73.6 billion. In 2008, just over 800 companies staged an IPO in deals totalling £65.5 billion.
The recovery in the UK and the global IPO markets comes despite the fact that a number of high-profile flotations, such as fashion retailer New Look and Madame Tussauds’ owner Merlin Entertainment, have been cancelled by their private-equity owners. Others have been delayed because of overpricing and market volatility. It’s also interesting to note that a number of companies opting to delist were generally the smallest – so at the end of 2009 the average market value of an AIM listed company was £44 million compared to £24m at the end of 2008. This appears to have increased investor confidence.
Activity levels have steadily increased throughout 2010 – there were 16 new listings in Q1 and a further 18 during Q2 and the rate of companies leaving the market has also slowed which suggests that the number of AIM listed companies will start climbing again by the end of the year.
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