The prospects of the UK IPO market are improving but are not expected to fully recover until 2025, Peel Hunt analysts have said.
The premier of three notable IPOs in Raspberry Pi, AOTI and Rosebank over the past two months have all set the tone for a route towards a “broader re-opening” next year, said Peel Hunt in a research note, but warned that they only expected ” small number of further UK IPOs in 2024″.
The research house’s ‘IPO Speedometer’ ticked up in August, from 27 to 29 when rating the IPO market’s health on a scale of 0-60.
Possible IPO targets in the pipeline included Anglo American De Beers, Thought Machine, and Starling Bank.
The key drivers of progress in August also included the continued “mixed success” of the European IPO recovery, along with improving UK investor sentiment and overall fundamentals.
“Although we have seen a partial rebound and limited investor panic, market activity and macro data will need to be monitored to assess if it will have any impact on the IPO market,” said Peel Hunt
“We continue to maintain that the UK IPO market is ‘selectively open’ for either best-in-class issuers or certain niche thematics that resonate.”
Rasperry Pi, which debuted on the stock market in June and already has a market capitalisation of £747m, has been a standout deal, showing that IPOs can work sometimes in the UK and boosting investor confidence.
Investment sentiment has also been upped by “relative political stability and improving macro conditions”, said the analysts, noting that outflows from UK funds are “decreasing significantly, and we are seeing more positive flows beneath the surface”.
Meanwhile, the FCA’s new listing rules unveiled last month should also make it more attractive for companies to list, with Peel Hunt stating it was already having “a number of discussions with potential issuers who are finding these updates helpful”.
However, the last six months of the year is still expected to be relatively selective, as Europe has shown a weaker couple of months compared to the first half, which included “a number of flagship jumbo deals,” the analysts said.
“This is largely a function of where companies are in their IPO preparation,” they explained.
Nevertheless, 73 per cent of European IPOs since the start of the year are currently trading up, leaving the UK well position to begin expanding out the successful IPOs on its shores.