Imbalance: So far this year, there have been 15 takeover bids for London-listed firms compared to only four IPOs, a ratio of nearly four to one.
Takeover Value: These takeover attempts total approximately £9 billion in value.
IPO Scarcity: Of the four IPOs, three were on the junior AIM market, with only one small listing (£54m) on the main market.
Market Sentiment: Analysts attribute the low IPO rate to "considerable uncertainty" stemming from factors like rising taxes and potential trade disruptions. Many takeover bids come at a significant premium, suggesting acquirers see UK companies as undervalued.
Expert Warnings: Figures like Peel Hunt's CEO Steven Fine warn Britain is "losing companies hand over fist," depleting the market.
Why this matters: This trend risks shrinking the pool of publicly listed UK companies, limiting investment opportunities, and potentially hindering broader economic growth if firms cannot easily access public capital.
The flow of companies going public in London has slowed to what AJ Bell analyst Dan Coatsworth calls a "dribble." Market volatility and economic headwinds appear to be deterring companies from pursuing IPOs, fearing choppy conditions upon listing. While there are some hopeful signs, with firms like Quantum Base and MHA announcing plans, the overall picture remains subdued. Rumours persist about potential future listings, including Waterstones, NMMC, Shawbrook, and CK Hutchison's telecoms arm, but concrete activity is sparse.
In contrast, takeover activity is robust. Major approaches include KKR's bid for Assura (£1.6bn) and Greencore's agreement for Bakkavor (£1.2bn). The prevalence of bids made at substantial premiums over market value fuels the argument that UK equities are currently undervalued, making them attractive targets for domestic and overseas buyers, particularly private equity. Peel Hunt's CEO highlighted potential targets like B&M, Halfords, and Jet2, often citing low valuations.
The disparity has prompted calls for intervention. Peel Hunt's Steven Fine advocated for measures to stimulate growth and encourage listings, such as reviving entrepreneur's relief (specifically tied to IPOs) and restoring dividend tax credits for pension funds to boost investment in UK shares. There's a sentiment that the UK needs to better "celebrate success" to foster an environment conducive to company growth and public listings.
Q: Why are there so few IPOs in London currently?
A: Analysts point to significant market uncertainty driven by rising taxes, potential US tariffs, and general economic concerns, making companies hesitant to list.
Q: Does the high number of takeovers mean UK companies are cheap?
A: The fact that many takeover bids are made at a significant premium to the target company's share price suggests that acquirers, including international buyers and private equity, view UK listed companies as potentially undervalued.
Q: What could potentially revive the London IPO market?
A: Experts suggest a need for greater market stability, increased investor confidence, and potentially supportive policy measures like tax incentives for listing or investing in UK equities.
The London Stock Exchange is currently more attractive for takeovers than for new listings, reflecting economic uncertainty and potential undervaluation.
This imbalance could impact investors by reducing the number of available UK public companies over time.
For businesses, it highlights the challenges of raising capital via IPO currently, while also indicating potential interest from acquirers.
Keep an eye on potential policy changes aimed at boosting the UK market and upcoming IPO announcements.
What measures do you think could best revitalise London's IPO market? Let us know your thoughts in the comments!
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Source 1: Takeovers outnumber IPOs three to one on London Stock Exchange target="_blank"
Source 2: Britain is losing firms hand over fist, says Peel Hunt boss target="_blank"
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