Surprise General Election result gives a boost to IPO market

Transcription

1 IPO Eye An overview of Q Surprise General Election result gives a boost to IPO market Main market 9 floats raised 3bn in Q2, a very good result considering the General Election took place this quarter. AIM 13 AIM admissions raised 351mn, an increase on the 6 admissions that took place in the opening quarter. It was widely expected that IPO activity in the second quarter of this year would slow down as a result of the General Election and, while the overall level of IPOs was some way off the performance seen at the same point in 2014, the surprise result of a majority government gave a boost to the quarter s second half IPO activity. The main market saw 9 IPOs this quarter raising 3bn, with over half the deals originating from overseas issuers. The Alternative Investment Market (AIM) celebrated its 20th anniversary this quarter and recovered well from its quiet opening to the year, producing 13 IPOs and raising 351m of funds. Global IPO activity maintained the steady pace set during the first three months of the year producing 631 IPOs in H1, a 6% increase on the same period last year. The US has produced 101 IPOs so far this year with healthcare being the dominant performer accounting for 40% of all IPOs. Asia-Pacific is the standout region so far in 2015 producing 355 IPOs in H1, up 66% on the same period last year. China has also had a strong quarter with deal volume up by 132% on Q1. EMEIA has had a more subdued first half of the year compared to 2014 which can be attributed in part to the growing uncertainty surrounding Greece.

2 Market listings New Issues Main market Date of admission Company PE backed Country of incorporation Region/s of domicile Sector 01 Apr 15 Sanne Group Plc Y Jersey Global Asset Management 02 Apr 15 BCA Marketplace Plc Y England UK and Europe Motoring 08 Apr 15 Shawbrook Group Plc Y UK UK Banking 05 May 15 Permanent TSB Group Holdings Plc N Ireland Ireland Banking 06 May 15 Integrated Diagnostics Holdings Plc Y Jersey Middle East Heathcare 10 Jun 15 Cairn Homes Plc N Ireland Ireland Housing 19 Jun 15 PureTech Health Plc N UK USA Healthcare 26 Jun 15 Sophos Group Plc Y UK Global Software De-merger Main market Date of admission Company PE backed Country of incorporation Region/s of domicile Sector 16 May 15 South32 Ltd N Australia Global Mining New Issues AIM Date of admission Company PE backed Country of incorporation Region/s of domicile Sector 02 Apr 15 Motif Bio Plc Y England USA Biotechnology 02 Apr 15 Marshall Motor Holdings Plc N England UK Motoring 07 May 15 Verseon Corp N USA USA Biotechnology 07 May 15 MayAir Group Plc N Jersey South East Asia Industrial engineering 07 May 15 Curtis Banks Group Ltd N England UK Financial Services 12 May 15 Satellite Solutions Worldwide Group N England Europe Telecommunications 19 May 15 Stride Gaming Plc N Jersey UK Online gambling 26 May 15 Elegant Hotels Group Plc Y England Barbados Hotels 03 Jun 15 Gear4music (Holdings) Plc Y UK UK Retail 04 Jun 15 Fishing Republic Plc N England UK Retail 08 Jun 15 Gateley (Holdings) Plc N England UK Legal 03 Jun 15 Adgorithms Ltd N Israel Global Digital Media 19 Jun 15 Applegreen plc N Ireland Ireland Petrol stations What constitutes an IPO? Not all new admissions, as listed by the London Stock Exchange, are defined as IPOs for the purposes of the commentary throughout this report. Our definition excludes secondaries, re-admissions, investment funds, transfers from AIM to Main (and vice-versa) and introductions where no money is being raised, or shares placed with new investors. 2 IPO Eye An overview of Q2 2015

3 Market cap. on admission ( mn) Funds raised ( mn) Placing price (p) Closing price (after first day of trading) Closing price (at QTR end) % change in price % 1,170 1, % % 1, % % % % 1, % Market cap. on admission ( mn) Funds raised ( mn) Placing price (p) Closing price (after first day of trading) Closing price (at QTR end) % change in price 8,400 N/A % Market cap. on admission ( mn) Funds raised ( mn) Placing price (p) Closing price (after first day of trading) Closing price (at QTR end) % change in price % % % % % % % % % % % % % IPO Eye An overview of Q

4 In this quarter The General Election and widely tipped prospect of a hung parliament slowed IPO activity at the beginning of this quarter. The unexpected result, however, helped boost investor and issuer confidence and stimulated IPO activity in the second half of Q2. The quarter produced 22 IPOs raising cumulative funds of 3.4bn which is a strong outcome given the market backdrop. Main market We saw 9 main market IPOs this quarter, with over half originating from overseas issuers. Once again private equity backed businesses made up a significant proportion (two thirds) of the listings. The quarter saw another challenger bank, Shawbrook, come to market. The bank which is backed by private equity firm Pollen Street Capital, markets loans to SME type businesses who are finding it difficult to get finance from the major high street banks. The bank managed to raise 90mn at a valuation of 725mn and the stock has since performed well, and is currently trading at 26% above initial offering price. What was particularly encouraging this quarter was the level of inbound IPOs, with over half of the deals originating from overseas. These stocks are all trading at a healthy average of 20% above initial offer price which should further enhance London s reputation as an attractive destination for international issuers. Particularly strong performers were the Egyptian businesses Integrated Diagnostics (healthcare) and Edita Food Industries (food manufacturing), which are trading at premia of 31% and 51% above their initial offer price respectively. London had its biggest ever tech IPO this quarter. Oxfordshire based IT security business Sophos floated on 26 June at a valuation of over 1bn. IPO Main market: historical performance 10,000 9,000 8, , Fund raise m 6,000 5,000 4, No. of IPOs 3,000 2,000 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Fund raise m No. of IPOs 4 IPO Eye An overview of Q2 2015

5 The group successfully raised 352mn and the listing will be viewed as a real coup by the LSE given that similar past floats have favoured NASDAQ over London. The funds raised will be used to pay down net debt and to help with the group s expansion into foreign markets. AIM AIM rebounded well from its quiet start to the year producing 13 IPOs raising 351m, over twice that produced in the opening quarter. As is typical of AIM the admissions covered a cross-spectrum of industry ranging from biotechnology to retail. This quarter saw two biotechnology admissions originate from the US, Motif Bio and Verseon. Motif Bio was trading at a staggering 244% above offer price at the time of going to press whereas Verseon has been more sedate trading at a 9% premium. Car dealership Marshall Motors floated this quarter raising 40mn at a market capitalisation of 115mn. The circumstances surrounding the deal are quite unique in that a formal intention to float was not published, but rather the issuer and advisors approached individual investors privately, in what is known as a stealth float. They can be beneficial in that they can provide a speedier process in coming to market and they can also avoid the investor scrutiny that comes with a public offering. However because there is often less publicity to attract investors this can often result in a lower float price. The Irish petrol station group Applegreen floated in June raising 75mn at a market valuation of 219mn. It was the second Irish business to float in London this quarter and it is also the largest fundraise to have taken place on AIM so far in The company has 150 sites across the UK and Ireland with two more in the US. The funds raised will be used to acquire new sites in the markets in which it operates and also to develop existing sites. Aftermarket performance At quarter end, main market IPOs were trading at an impressive average of 19% above offering price and AIM admissions are trading at an average premium of 30%. The average for AIM admissions lowers significantly to 12% when Motif Bio is removed from the data. IPO AIM market: historical performance 1, Fund raise m 1,200 1, No. of IPOs 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Fund raise m No. of IPOs IPO Eye An overview of Q

6 In this quarter Overall the IPO market has performed strongly in the aftermarket this quarter with all but one IPO trading in positive territory. The strong post issue trading performances perhaps reflect a cautious approach to pricing given the uncertainty which prevailed during most of the quarter. The impending general election and the events in Greece over the past few weeks have undoubtedly had an impact on the market but nevertheless quality assets, sensibly priced have found demand. Volatility The FTSE indices have been on an upward track for the majority of the quarter with most peaking around the late May, early June period. However the recent events in the Eurozone have had an impact causing all indices to drop considerably. As of 30 June, all FTSE indices remain above their level of a year ago except for the FTSE 100 which is trading just under it s opening position. FTSE Indices FTSE 100 FTSE 250 FTSE All-Share FTSE AIM All-Share January January January January January February February February February March March March March April April April April May May May May May June June June June 2015 Source: S&P Capital IQ 6 IPO Eye An overview of Q2 2015

7 Looking forward The decisive general election result was welcomed by the wider market and has provided a heightened level of optimism for potential IPO activity in the second half of the year. Many businesses have kick started plans to come to market in Q4 and IPO pipelines are currently full. However, at the time of going to press the Greek referendum had just returned a no vote in relation to the proposed EU bailout conditions which could potentially see in another period of uncertainty whilst Greece s future is determined. It would appear though that this issue will not be resolved quickly. Whilst both investors and issuers are likely to be more sensitive to market risk, at the present time we do not detect any signs of the market closing. from abroad starting to consider coming to the London. The positive post-trading performances that we have seen from those IPOs this quarter should provide greater inducement to overseas businesses. Overall we feel that the London market will remain open in the medium term. Private Equity still remains a good driver of market activity and we expect this to be further supplemented by an increasing level of inbound deals. Q3 will undoubtedly be quieter given the ensuing summer holidays but we expect Q4 to provide a good level of activity for what has been a good year to date. Indeed, one of the risks for potential Q4 issuers may be the sheer volume of IPOs looking to come to market. As previously discussed it was very encouraging to see an increasing number of international IPOs this quarter and we hope this will spur on other overseas businesses to join the London market. At present we are seeing a healthy number of businesses IPO Eye An overview of Q

8 IPO specialist team For more information contact our international specialists or alternatively speak to your local EY adviser. David Vaughan IPO Leader Tel: dvaughan@uk.ey.com Richard Harding Partner, UK North Tel: rharding@uk.ey.com Dom McAra Executive Director, UK Midlands Tel: dmcara@uk.ey.com Scott McCubbin Partner, UK London Tel: smccubbin@uk.ey.com Lesley Roberts Partner, Financial Position and Prospects Tel: lroberts@uk.ey.com Richard Hall Partner, UK London Tel: rhall2@uk.ey.com David Wilkinson Partner, UK South Tel: dwilkinson@uk.ey.com Nadeem Khan Director, India Tel: nkhan1@uk.ey.com Steve Collins Director, Americas Tel: scollins@uk.ey.com Timothy Pinkstone Director, Russia and CIS Tel: tpinkstone@uk.ey.com Marcus Bailey Executive Director, Middle East and Africa Tel: mbailey2@uk.ey.com Ian Kelly Director, Ireland Tel: ikelly@uk.ey.com Cary Wilson Partner, Ireland Tel: cwilson7@uk.ey.com Please visit for more information on how we can help you or your business. 8 IPO Eye An overview of Q2 2015

9 Relevant programmes EY Global IPO Center of Excellence Our Global IPO Center of Excellence is a virtual hub which provides access to tools and knowledge for every step of the journey from finding out more about what going public means to considering capital raising options and addressing post-ipo risks. It provides access to all our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. IPO Eye An overview of Q

10 Notes 10 IPO Eye An overview of Q2 2015

11 Notes IPO Eye An overview of Q

12 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. About EY s IPO services EY is a leader in helping to take companies public worldwide. With decades of experience, our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. Ernst & Young LLP The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF Ernst & Young LLP. Published in the UK. All Rights Reserved. ED None 9821_9852.indd (UK) 07/15. Artwork by Creative Services Group Design. In line with EY s commitment to minimise its impact on the environment, this document has been printed on paper with a high recycled content. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ey.com/uk