IPO market holds up over longer term, despite recent volatility
8 December 2016
The 11 Main Market IPOs that have completed in 2016 generated an average return of 11.6%, an outperformance against the FTSE 350 of 4.3 percentage points year to date, according to analysis from Deloitte, the business advisory firm. Listings this year had to contend with market uncertainty over the EU referendum and US elections, as well as commodity price volatility at the start of the year. Over the longer term, IPOs continue to offer attractive returns, rising by 17.5% on average and outperforming the FTSE 350 by 14.8 percentage points since the start of 2014.
Chris Nicholls, head of IPO and Equity Advisory at Deloitte, comments:
“From our experience, many investors have remained interested in IPOs where both the equity story and the valuation metrics are sufficiently compelling. This year will be remembered for uncertainty and surprise, conditions that have contributed to a number of stalled listings. However, those that have gone ahead have typically performed well.
“A particular challenge for issuers is how to respond to volatile stock market conditions and to identify what preparations can be made to shorten lead times for a listing. Companies and shareholders need to be ready to move rapidly when a window appears.”
An investment of £1,000 in each of the 63 IPOs launched since 2014 is now worth £74,017, whereas a £1,000 investment in the FTSE 350 at each IPO date would have risen slightly to £64,716.
John Hammond, head of Equity Capital Markets at Deloitte, adds:
“While investors continue to monitor macroeconomic issues our IPO pipeline looks strong into Q1 2017 and beyond. Both UK and overseas companies are eyeing up a London listing, with financial services, TMT and consumer sectors well represented. One potential sticking point is the recent narrowing of equity yield premia versus bonds following the US election result. This may lead to fixed income investments becoming more attractive to investors.”
Notes to editors
IPOs as referred to above are defined as London Main Market listings of shares for trading companies (i.e. investment companies, venture capital trusts, transfers from other markets, GDRs, cash shells etc. have been excluded), raising at least £25 million. The performance figures reflect share price movements only, take no account of dividends, and are not a measure of total shareholder return. Market data is as at close of business on 5th December 2016.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
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