(Bloomberg) — London’s market for initial public offerings is stirring back to life after months of near inactivity, but bankers aren’t celebrating yet as a bigger recovery could well be a year away.
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The UK IPO market is expected to lag behind the rest of Europe this year, with a full rebound not seen before 2025, according to a recent survey of equity capital markets bankers by KPMG.
The intended floats seen so far this year are “a promising sign, but the general consensus is we don’t expect to see normalization in the UK this year,” Aadam Brown, head of independent equity capital markets advisory at KPMG UK, said in an interview. KPMG defines “normalized” markets as those in which most firms attempting an IPO successfully complete them.
“We expect to see a more normalized UK IPO market in 2025,” he said. “The selectivity we see in markets right now will dissipate and IPOs will be more accessible to a larger number of listing candidates wishing to explore that option.”
Air Astana, Kazakhstan’s flag carrier, and The London Tunnels Plc, a company developing once-secret tunnels in the city into a tourist attraction, said last week they plan UK stock-market listings in a rare burst of activity.
“We are at a point where the recovery is starting, there is more optimism, but it’ll be a slow progression,” Brown said.
Valuation Gap
Any resurgence in activity will be welcome in a market that’s reeling from a sharp fall in the number of listings. Just about $1 billion was raised in the UK via IPOs last year, the lowest level in decades, according to data compiled by Bloomberg.
UK and international firms alike have shied away from listing in the UK, deterred by a small buyer base, a wide valuation gap between issuers and investors, and poor shareholder returns from recently listed firms.
The UK is also struggling to stem an exodus of firms to New York and elsewhere. TUI AG this month became the latest to say that it plans to cancel its London listing. UK pollster YouGov is among firms considering scaling back its presence on the London exchange, while Irish building materials group CRH and packaging company Smurfit Kappa Group Plc have already taken action to step back from the market.
Still, a New York listing isn’t for everyone, bankers caution, and there’s hope yet for the market.
“London has not lost its luster,” Brown said, citing the survey, which showed that alongside New York, the City is still considered a “key destination of choice for large international companies.”
Twenty-three banks participated in KPMG’s survey, including the likes of Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley.
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