City looks to end of year float flurry as companies prepare IPOs
London flotations are bouncing back as investor confidence returns to the market, with a pipeline of new listings expected before Christmas.
Initial public offerings (IPOs) were in short supply during the summer, with China’s slowing economy triggering global stock market mayhem and a sharp downturn in investor morale.
But yesterday, McCarthy and Stone, which builds retirement housing across the UK, announced its intention to float in London next month to raise £70m to support its expansion plans, while share registrar Equiniti set its price range for an upcoming IPO to raise £315m.
They follow payment processing firm Worldpay, whose £5bn IPO this week is set to be the largest float of the year, and insurer Hastings, which also went public, albeit to a more muted response.
Read more: London IPOs fell sharply in third quarter
“After a very slow third quarter, the fourth quarter will be the strongest in 2015,” Scott McCubbin, partner and IPO leader at EY, told City PM
“Companies we expected to delay their flotations until early 2016 are floating in the fourth quarter of 2015. Concerns about China seem to have faded away.
“From what we’re seeing now, the IPO market is looking very strong. There has been a turn in the last week or so. This pricing [of recent IPOs] looks OK and there is oversubscription in the marketplace. I think this is the time of the year that we’re starting to see an increase in flotations.”
Despite ongoing worries over a global growth slowdown, market volatility appears to have settled, removing some of the uncertainty from London’s stock market and leading to a recent eight-day winning streak on the FTSE.
Read more: Value of European IPOs drops following Chinese stock market crash
“No one wants to sell into a weak market and underprice their flotation. Now that conditions have improved, people want to get their deals underway,” said Mark Hughes, capital markets partner at PwC.
“After a quieter summer, we have a more optimistic outlook for the rest of the year. The market is more receptive to IPOs now. There has been a decent flow of deals in London over the past 10 days. There are still some very good assets out there.”
The uptick in deal activity is expected to strengthen as the year goes on.
Metro Bank, the biggest of Britain’s challenger banks, is gearing up for an IPO that will see it raise £300m and value the firm at £1bn. It is expected to float in the first quarter of 2016 and has begun the process of enlisting advisers.
Confidence is slowly returning, but hopes of a frenzy of deals may be a little premature, warned David Madden, market analyst at IG. “It’s not as good as it was 12 months ago, but it’s on a gradual ascend, like the stock market itself,” he said.