COVID-19 pandemic locks down IPOs but market activity continues - IPO Eye An overview of the London Stock Exchange listings in Q2 2020
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COVID-19 pandemic
locks down IPOs
but market activity
continues
IPO Eye
An overview of the London Stock
Exchange listings in Q2 2020
Market overview
COVID-19 all but suspends
London IPO activity but
fundraising continues
“
London has again confirmed its status
as a pre-eminent equity market globally,
leading the way in Europe for the most
The COVID-19 pandemic caused IPO activity in London to effectively cease in March
and this persisted throughout the second quarter of the year. Market activity in follow-on capital raised in Q2 2020.
the quarter was predominantly focussed on existing issuers leveraging their public Whilst IPO activity has been almost
listings to raise further capital to shore up finances as the pandemic lockdowns
caused economic shutdowns across the globe, in what should have been one of the extinguished by COVID-19, in what is
most active quarters for IPOs in the year.
historically the busiest quarter of the year,
The Main Market saw just one IPO take place, Blackfinch Spring VCT plc, which
raised some £3m, while there was no IPO activity on the Alternative Investment
the markets were focussed on supporting
Market (AIM). However, what the market did witness was the second listing under fundraising by existing issuers to shore-up
the London Shanghai Stock Connect programme with the Shanghai listed China
Pacific Insurance Group, successfully raising £1.4b by listing GDRs in London.
finances to mitigate the impact of the
Given the circumstances, activity by existing issuers dominated the market pandemic.
with some £17.2b being raised in a range of placings, rights issues and other
transactions. In the period there were 121 transactions with a deal value over £5m, Scott McCubbin
69 on the Main Market raising £15.2b, and 52 on AIM raising £2.0b. Combined with EY UKI IPO Leader
activity in Q1 total funds raised were in excess of £21b, making this the busiest first
half for follow-on fundraising since 2009 and the end of the financial crisis.
In aggregate over 40% of follow-on capital raised in Europe in the quarter was
raised in London, once again confirming the market as the pre-eminent fundraising
location within Europe. If IPO and follow-on funds are combined London sits in third
place globally behind a combined NYSE and NASDAQ in first place and Hong Kong
in second.
Something to celebrate in the quarter was also the 25th anniversary of AIM. Whilst
it didn’t register any IPO activity in the quarter, during its 25 year lifespan over
3,800 companies have listed raising in aggregate over £45b on IPO.
1Volatility Global IPO activity
In the Q1 IPO Eye we highlighted that the markets had experienced volatility levels Globally, there were 186 IPOs raising proceeds of US$41b in the second quarter of
not seen since the 2008 crisis and there was a corresponding fall in market indices in 2020. Unsurprisingly, this is a 39% decrease in deal numbers and a 32% decrease
the period to March 2020. Since then there has been a gradual reduction in volatility in proceeds compared to Q2 2019. The COVID-19 outbreak reduced IPO activity
and the London markets have recovered, but they are some way short of their pre particularly in the first two months of the quarter with a 48% decrease by volume
COVID-19 highs and around 20% lower than they were at the start of the year. (97 deals) and a 67% decrease in proceeds (US$13.2b) compared to April and
May 2019.
The best performing sectors this year have, unsurprisingly, been healthcare and
personal care with the worst performing sectors being travel and leisure and There was a late flurry of deals in June, bringing total activity to 186 deals raising
automotive. $41.1b in the quarter making global activity for H1 2020 some 19% behind H1 2019
for deal numbers and a decrease of 8% in proceeds. Despite Global totals showing
a decline against 2019, the Asia-Pacific markets actually outperformed H1 2019 as
activity rose 2% by deal numbers (270 deals) and 56% by proceeds (US$34.9b) as
110.00
this region restarted activity.
105.00
In terms of overall deal numbers in H1, Shanghai was the leading listing venue in
terms of funds raised with 74 IPOs raising US$15.8b. However, NASDAQ led the way
on proceeds with $17b being raised in H1 in 53 IPOs.
100.00
As in Q1 2020, the technology, healthcare and industrials sectors remained the
95.00 most prolific producers of IPOs in the first half of 2020, together accounting for
246 IPOs (59% of global IPO by deal numbers) and raising US$42.7b (61% of global
90.00 proceeds) altogether. By proceeds, technology was the strongest sector with
US$17.2b raised (25% of global proceeds).
85.00
80.00
75.00
FTSE 100
FTSE 250
70.00
FTSE All-Share
FTSE AIM All-Share
65.00
60.00
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2Looking forward — H2 2020
“
The markets have faced severe headwinds, but despite this, stock prices and valuations are
recovering, reflecting improved investor sentiment and risk appetite. The volatility index
(VIX®) has also receded considerably from its high in March, approaching levels more
receptive for companies to go public. IPO pipelines continue to grow in
Assuming there is no significant ‘second wave’, there is a market window opening in London major markets. A further rebound of
for the period post summer and we have already seen AIM start its 26th year with a new
admission in early Q3. H1 2020 deals that were originally shelved and pushed into 2021 are IPO activity is expected in H2 2020,
now being considered for potential H2 2020 listings, albeit it is likely that market activity will
be again dominated by fundraising activity from existing issuers.
on the back of strong June global IPO
Any issuers will need to be able to demonstrate resilient performance through the first
performance. However, uncertainties
half of the year and have a business model that can withstand any further COVID-19 continue to be present. A possible second
driven downturns ahead. We are expecting this to include businesses in the technology or
technology-linked sectors that are less impacted by physical restrictions and as we have
wave of COVID-19, US-China tension,
stated before, investors will be discerning in their choices. Brexit negotiations, the US election and
Issuers will also need to be able to ‘roadshow’ to investors in a virtual world, and more low oil prices could derail some of the
attention will need to be paid to developing market profile and investor awareness in
advance of any virtual roadshow programmes. positive global momentum we began to
see in June.
Globally
Given the COVID-19 outbreak and its negative impact on global economic activities, in the Scott McCubbin
EY UKI IPO Leader
short to medium term, governments around the world will continue to implement policies
and stimulate economies against rising unemployment. At the same time, central banks will
inject more liquidity into the financial systems. Both actions bode well for equity markets
and IPO activity in H2 2020.
Nations that have come out of lockdown are seeing activity, notably Asia-Pacific markets
have had a relatively busy June, and we would expect this to continue into the second half of
the year.
However, there is a lot of uncertainty ahead including lingering geopolitical tensions, Brexit
negotiations, low oil prices and the US election later in the year. These compounded by a
potential ‘second wave’ of COVID-19 could hamper the markets later in the year and reduce
the uptick in momentum that we have seen.
3Relevant programmes
EY Global IPO Centre of Excellence IPO Retreat
Our Global IPO Centre of Excellence is a virtual hub which 24–25 May 2021
provides access to tools and knowledge for every step Looking to float in the next 12–36 months?
of the journey from finding out more about what going Our IPO Retreat helps CEOs and CFOs contemplating an IPO on one of the
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IPO knowledge, tools, thought leadership and contacts find out whether an IPO is the right growth option for your business.
from around the world in one easy-to-use source. To find out more, contact:
Aneliya Petrova, apetrova@uk.ey.com
ey.com/ipocentre
Contacts
Scott McCubbin Marcus Bailey
IPO Leader IPO Business Development Leader
For more information about
the IPO Eye and on any IPO — Tel: + 44 20 7951 3519 Tel: + 44 20 7951 1357
related matter please contact: Email: smccubbin@uk.ey.com Email: mbailey2@uk.ey.com
Please visit ey.com/en_uk/ipo for more information on how we can help you on your IPO journey.
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