Green shoots are appearing in the moribund London flotations market and a Labour government could further revive international investors’ appetite for initial public offerings in the City, according to Peel Hunt.
As the broker launched a new measure of investors’ appetite for floats, it said that Britain was now “selectively open” to stock market debutants.
Its newly created “IPO Speedometer”, based on a mixture of 30 different qualitative and quantitative data points, increased from a measure of 15mph in January to 24mph. The range is nought to 60mph, where the top speed indicates a hot market highly receptive to IPOs.
The dearth of recent floats in London and decisions by some London-listed companies to defect to other jurisdictions have troubled both the City and the Treasury and have led to reforms aimed at reinvigorating London’s appeal.
In its latest research, Peel Hunt took heart from a recent rise in IPOs in Europe, which it said were a good lead indicator for the British market. Renk Group, the German industrials company, Douglas, a German perfumes group, and Galderma, a Swiss cosmetics company, have successfully listed their shares in recent weeks.
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The strong net global inflows into equities as an asset class was also a promising signal, it said, even though investors continued to withdraw money out of UK equities for a 34th successive month in March.
Peel Hunt, which with Jefferies is an adviser on the planned flotation of Raspberry Pi, the British computer maker, also uses artificial intelligence to score sentiment based on the qualitative feedback it receives from conversations with investors.
Charles Hall, head of research at Peel Hunt, said there were promising early signs of investors’ demand for IPOs. Secondary volumes in the equity capital markets were strongly up.
He said that an election could be good for sentiment among international investors after the political uncertainty of recent years. “Having a Labour government with a decent majority that could be in power for ten years would remove some of the economic, political and uncertainty discount.” He added that a pick-up in IPOs could begin in the second half of this year and could strengthen further in 2025.
Boots, the pharmacy chain, Starling Bank, Waterstones, the bookseller, and Zopa, the online lender, have been among the companies seen as potential flotation candidates for London. Others including Klarna, the credit group, and the ice creams division of Unilever are thought more likely to choose New York and Amsterdam, respectively.
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The new Speedometer, which will be published every two months, would help prospective IPO candidates to time their flotations better and would help them to prepare, Hall said. It typically takes six to eighteen months to get a private company ready for a flotation.
