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2019 market entrants outperform broader market, despite IPO volumes and funds raised tumbling

2019 market entrants outperform broader market

Despite London’s IPO market seeing a steep fall in the number of companies listing during 2019, those that did make their market debut over the course of the year enjoyed positive post-IPO performance, according to analysis from KPMG’s Capital Markets Group.

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Despite London’s IPO market seeing a steep fall in the number of companies listing during 2019, those that did make their market debut over the course of the year enjoyed positive post-IPO performance, according to analysis from KPMG’s Capital Markets Group.

Market entrants in 2019 achieved an average post-IPO return of 26.7% on the main market and 15.5% on AIM - both outperforming the broader market, which saw returns of 14.2% and 11.6% respectively. The two largest main market IPOs of the year, Network International and Trainline, were trading at +47% and +45% respectively at 31 December 2019.

Marco Schwartz, head of KPMG’s Equity Capital Markets Advisory Group, said: “Whilst UK listings saw a decline in 2019 as a consequence of persistent macroeconomic and political uncertainty, the successful post-IPO market performance of the majority of 2019 debutants provided some much-needed cheer.”

As a result, we saw several instances of shareholders capitalising on strong IPO aftermarket performance to further monetise their remaining equity stakes. For example, pre-IPO shareholders in both Trainline and Network International took the opportunity to sell down stock twice following their IPOs earlier in the year.”

Only 24 main market IPOs completed during 2019 – the bulk during the first half of the year - compared to 43 in 2018. AIM IPO volumes also suffered, with only 11 listings in contrast to 35 in 2018, reflecting the risk-averse appetite of investors, coupled with the accessibility of growth capital in private markets.

In contrast, the secondary market was particularly active, with placings up 19% year-on-year. Additionally, London’s markets also saw a strong trend towards demergers, public company M&A transactions and public to private deals, which increased 40% year-on-year.

Linda Main, head of KPMG’s UK Capital Markets Group, said: “With 2020 now firmly underway, the pipeline for UK IPOs is strong off the back of the result of December’s general election, and reflecting the number of potential issuers who deferred their transactions until sentiment became more favourable to sellers. Of course, some, if not all, of the factors which supressed ECM activity in 2019 are likely to persist in the short to medium-term. However, we can be optimistic that activity levels will recover over the coming 12 months.

Linda Main added: “We should also take heart from the fact that despite the headwinds experienced in 2019, London retained its position as the leading European market, accounting for almost a third of all fundraisings. The IPOs of Network International, Airtel Africa and Finablr, along with the first transaction under the LSE-Shanghai connect programme by Huatai Securities are testament to London’s continued appeal to international and emerging market issuers.”
She concluded: “Looking ahead, issuers must adapt to the evolving investor landscape and sentiment in order to remain attractive, whilst proactive investor engagement will become increasingly important to protect against activist strategies.

“The increased importance placed on ESG by Fund Managers is also expected to continue apace in 2020, following the LSE’s ‘Green Economy’ accreditation for its IPO candidates in 2019, enabling companies to market themselves to investors as a ‘sustainable investment’.”

-ends-

For further information please contact:

Katy Broomhead, Corporate Communications
Tel: 0161 246 4623 / 07824 537963
Email: katy.broomhead@kpmg.co.uk

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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