The London Stock Exchange saw a big fall in the value of fundraising from flotations in the first quarter of this year, according to new figures from professional advisory firm EY.
The main London Stock Exchange and the Alternative Investment Market together saw 19 IPOs (initial public offerings or flotations), which raising £397m, in Q1. This compared to a record breaking £5.6bn in Q1 of 2021 with 22 listings.
The market main had 12 floats which raised £308m , with the seven listings on AIM raising £89m. The largest main market float was New Energy One Acquisition Corp Plc which raised £175m
Among the floats on AIM was Bridgend based Facilities by ADF, which provides trailers for the booming high-end television (HETV) and film industry. Its listing in January raised £18m.
In Q1 of 2020 the amount raised on the two exchanges was £615m (five in total) and pre-pandemic in 2019 it was £481m (five in total).
Matt Eves, a partner in EY’s strategy and transactions in Wales and the south-west of England, said: “The London IPO (initial placing offering) market has experienced a difficult start to 2022. There are strong headwinds as a result of the war in Ukraine, high energy and commodity prices alongside inflationary pressures and associated interest rates rises which are ultimately creating uncertainty for the future cash flows of businesses looking to float.
"These pressures combined with supply chain issues are likely to lead to a continuation of the weaker market in Q2 2022. We will hopefully see a return to a stronger equity market later in the year, although this remains at risk given the uncertain geopolitical and macroeconomic landscape.”
Globally there were 321 floats in Q1, raising $54.4bn. This is 37% lower in terms of the number of listings and a 51% decline in terms of proceeds compared to Q1 2021. The decreases are not unexpected when compared to 2021 which was the most active Q1 in the last 21 years.
As with the UK market, geopolitical tensions, commodity and energy prices rises and inflation and associated interest rate rises led to a reduction in the number of IPOs.
Energy floats led the way in terms of proceeds, with $12.2bn raised in total. Technology and life science IPOs, which had been the key growth area in recent years, saw a marked decline, with a combined 107 IPOs in Q1 2022 compared to 220 in the first quarter of 2021. This was in part due to the disappointing post-IPO performance which has led to a change in investor sentiment in these sectors.
Shanghai was the leading global exchange in terms of proceeds, hosting 37 IPOs and raising over $18.3bn in the process. Combined with the Shenzhen exchange, China witnessed 24.3% of global IPOs by number and 51.7% by proceeds.
Nasdaq, which was most prevalent market in 2021, saw a marked decline with only 23 IPOs in Q1 2021 compared to 73 in the equivalent quarter in 2021, demonstrating a reduction in the number of technology IPOs. The largest IPO globally in the quarter was LG Energy Solution, which raised $10.7bn on its listing in Korea (KRX).
Helen Pratten, EY strategy and transactions partner, said: “The record-breaking IPO market in 2021 was always going to be difficult to follow, and unfortunately, the markets have been hit by a maelstrom of adverse factors. Technology stocks, previously the driving force, have seen a reduction in share prices and hence a weakening in investor sentiment.
"The market is cyclical, and it is hoped that activity will return later in the year, but in the short-term IPO-bound companies should remain alert to the right window to move, whilst retaining focus on driving their equity story so they remain an attractive option when markets open.”