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Can London's #IPO market bounce back to its £8 billion historical average? Following a massive £2 billion resurgence late last year , soaring energy prices and geopolitical instability have brought the global market to a standstill. We sit down with Brian Hanratty, head of equity capital markets at Peel Hunt, to discuss why the current #StockMarket pipeline is actually the strongest seen in years.
00:00 Intro
00:40 UK IPO Pipeline Outlook
02:14 Market Conditions Needed
03:16 London vs. US Listings
04:56 UK Equity Reforms Impact
06:21 The £8 Billion Market Goal
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0:00
After lackluster couple of years,
0:01
London's IPO market roared back into
0:04
life at the tail end of last year with
0:05
fresh floats from the likes of British
0:07
bank Shawbrook and tin tuna giant
0:09
Princes Group. But now with war raging
0:12
in Iran and energy prices soaring,
0:14
geopolitical instability has pushed the
0:16
global IPO market back to a standstill
0:19
with high-profile floats put on ice. So,
0:22
how long will it be before London's
0:23
listings make a comeback? I'm joined by
0:26
Brian Hanratty, head of equity capital
0:28
markets at Peel Hunt. So, Brian, if we
0:30
were doing this interview a couple of
0:32
months ago before all of this
0:33
geopolitical storm and I asked you about
0:35
the IPO outlook, how would your answer
0:37
differ now relative to 2 months ago?
0:40
Sure. Well, as you said, the UK IPO
0:42
market roared back into action at the
0:44
back end of last year. H2 25 was the
0:47
biggest half we saw for UK IPO issuance
0:50
by some way since 2021. We had about 2
0:53
billion pounds of issuance over the
0:55
course of H2 last year. So, that was
0:58
very meaningful progress versus what
1:00
we've seen in recent years. And, you
1:03
know, if you ask me a couple of months
1:04
ago and actually the answer is still
1:06
pretty similar now. This is the most
1:08
constructive we've been on the UK IPO
1:10
market in some time. And actually the
1:12
pipeline is the best we have seen in a
1:16
number of years. I mean, what we've seen
1:18
working well in the UK IPO market in
1:20
recent years in the UK was generally
1:22
founder-led, probably more mid-cap
1:24
businesses come to market. We started to
1:26
see a bit of private equity activity
1:29
towards the back end of last year. I
1:30
mean, you mentioned Shawbrook. But now
1:32
as we look forward, we're seeing much
1:34
bigger companies, massive brand names,
1:37
bigger private equity assets come to
1:40
market and at least well at least start
1:42
to get ready to come to market. And
1:44
look, how is my answer different now?
1:46
They all still remain in the pipeline.
1:48
We still remain very constructive on it.
1:51
I think the pipeline was always going to
1:53
be very H2 weighted. But you're right,
1:55
those companies that are looking at Q2
1:58
are definitely taking a pause for now
2:01
given recent market events and
2:02
volatility.
2:04
And I guess what are the sort of
2:06
conditions that need to materialize that
2:08
aren't the current conditions for for us
2:11
to see that that revival in in IPO
2:13
activity? Yeah, sure. Well, firstly,
2:15
maybe let's look at what's happened. So,
2:18
I mean, headline market performance in
2:19
Europe down somewhere between 5 to 7%,
2:22
which on the surface actually doesn't
2:25
seem too severe, but it's actually more
2:28
what's happening beneath the surface.
2:30
So, we've seen some big sector moves and
2:32
I think importantly, volatility has shot
2:35
up. So, look, that makes a reasonably
2:38
difficult backdrop to do an IPO over the
2:41
very short term. What would we like to
2:43
see? I mean, ultimately we would like to
2:45
see markets stabilize. How is that going
2:47
to happen? Well, the market's hoping
2:49
hoping for a short-term resolution for
2:51
the conflict. So, that's certainly what
2:53
I would like to see. And the big
2:55
question this all raises is
2:58
is there a higher risk of a
3:00
stagflationary
3:01
backdrop that impacts how companies see
3:05
their forecasts, that impacts consumer
3:07
demand. So, I think we'd like to see a
3:10
bit more certainty around the outcomes
3:12
to get more confidence on on the
3:14
near-term outlook for IPOs. We spend a
3:16
lot of time talking about how companies
3:19
are weighing up different IPO venues. Do
3:22
they pick London? Do they pick
3:24
Amsterdam? Do they go across the pond to
3:26
New York? And certainly we have seen
3:28
some British companies opt for the US
3:31
over the UK equity markets. With that
3:33
being said, there have been some changes
3:36
to conditions the past few months. We've
3:39
definitely seen reports of some
3:42
investors seeking to sort of rebalance
3:44
their equity portfolio away from the US
3:47
a bit. So, does that change the dynamic?
3:49
Does that change their decision-making a
3:51
bit for a prospective British company
3:54
looking to IPO? It does. So, I mean,
3:57
there's been a bunch of things feeding
3:58
into that more positive outlook for the
4:00
UK.
4:01
One of those is that sector and
4:04
geographic rotation more towards the UK.
4:07
I mean, if you look at UK equity market
4:09
performance compared with the US, it's
4:11
clearly been an outperformer over the
4:13
last couple of quarters and that's
4:14
something that definitely feeds into to
4:16
issuers' decisions. I mean, on that
4:19
point more generally, I think we've made
4:21
some very positive progress. You're
4:23
right in recent years that we've seen
4:25
some big companies move to the US. You
4:27
know, I would say in a lot of cases
4:29
there, that profile of company has has
4:32
changed significantly and usually their
4:34
US business has become a a much bigger
4:37
portion of the pie. So, you know, if we
4:39
were IPOing a lot of those businesses
4:40
now, I think they would more naturally
4:43
list in the US. But we're seeing much
4:45
more progress. More international
4:47
companies are choosing to list in
4:49
London. And actually if we look at the
4:51
pipeline, we're seeing a bunch more
4:53
international companies as well consider
4:55
listing here.
4:56
We're also seeing some changes to UK
5:00
equity markets
5:01
both on the
5:02
the sort of policy front with things
5:04
like the Edinburgh reforms with the
5:08
stamp duty holiday on on new IPOs that
5:11
was that was introduced recently as well
5:14
as talk about how pension funds might be
5:17
getting back into UK equities in the way
5:19
they've sort of steered clear of for the
5:21
past couple of years.
5:23
Is that also a factor in in companies
5:27
company directors' minds when they're
5:28
thinking about where to list? Yeah,
5:30
definitely. Look, I think if you asked
5:32
me this question 2 years ago and you
5:35
asked me what we needed to fix
5:38
in UK equity markets and IPO markets, I
5:41
would have said regulatory change would
5:43
have been one of those changes. I think
5:46
the conversation has moved on pretty
5:48
significantly now and I think it's now
5:50
much more of a case of run more of a
5:53
level playing field with the
5:54
requirements around Europe and it's less
5:56
around a need for more regulatory change
5:59
and more of a need just to see more data
6:02
points to give other companies
6:04
confidence about listing here. But
6:05
certainly now the regulatory environment
6:08
I would say is much more on a par with
6:10
Europe. You mentioned a bunch of the
6:11
changes. We've simplified
6:14
the listing segments as well. And yeah,
6:17
I think that's become much less of a
6:19
negative point in issuers' minds when
6:20
they think about listing here. And
6:22
lastly, I suppose could you sort of
6:24
quantify for us what a healthy IPO
6:27
market would look like? I mean, you
6:29
know,
6:30
if all the sort of conditions that
6:32
companies felt they needed to list were
6:34
met, how big would that market be? How
6:37
many floats would we see per quarter?
6:39
How much capital would we would be
6:40
raised? That's a very good question. And
6:43
you know, you mentioned the IPO market
6:45
roaring back into action last year. In
6:48
H2, we saw about 2 billion pounds of
6:50
issuance and I mean, that was the much
6:52
bigger share of the issuance last year.
6:54
So, the overall yearly issuance was just
6:57
above that. If you look at the average
6:59
UK IPO issuance over the last 15 years
7:02
or so, it's actually much closer to
7:04
about 8 billion. So, even though we've
7:07
made massive progress, there's still
7:10
significant runway to get back towards
7:13
where we used to be. So, as I said, 8
7:15
billion pounds of issuance was the sort
7:17
of average over the last 15 years and I
7:19
think we'd be hoping to get much closer
7:21
to that number in a more normalized IPO
7:24
environment, which I think we're on the
7:26
way to seeing. And again, as I
7:28
mentioned, this is the most constructive
7:30
we've been on the pipeline in some time.
7:31
Well, 8 billion would certainly keep us
7:33
busy at City AM with all the reports
7:35
we'd have to cover. So, yeah. Thanks
7:37
very much, Brian, for coming in. And to
7:39
keep up to date with all the IPO news,
7:41
head over to cityam.com.
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