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Lexis®PSL Corporate and Market Tracker have conducted research to examine current market trends in respect of equity capital markets (ECM) transactions in 2019, using 2018 and 2017 ECM transactions for comparative purposes.

Background and approach

We reviewed a total of 233 IPOs (131 on the Main Market and 102 on AIM). The IPOs reviewed exclude introductions and transfers from AIM to the Main Market.

Market capitalisation has been calculated at the opening price on the day of admission. Where gross proceeds have been calculated, the figures refer to the gross proceeds received by the company and not proceeds raised by selling shareholders (if any). The percentages included in this report have been rounded up or down as appropriate and accordingly percentages may not in aggregate add up to 100%.

This review of 2019 IPOs forms part of our annual trend report which aims to provide insight into the current dynamics of ECM activity in the UK. The other parts of our 2019 trend report comprise:

•             Secondary Offers in 2019—Main Market and AIM

•             Standard listings in 2019

•             Risk factor disclosure in 2019 IPOs

•             Legal and regulatory developments in Equity Capital Markets 2019

Summary

IPO activity slowed substantially in 2019 as Brexit deadlines and geopolitical tensions suppressed investor appetite and created uncertainty for issuers considering an initial public offer of shares. Main Market IPO activity was substantially subdued compared to the year before. However, the London flagship market did attract some high profile international companies such as Network International Holdings and Airtel Africa both valued at over £2.5bn on admission. AIM had a difficult year in terms of IPO activity with only ten companies coming to the market, a record low since its launch in 1995.

Transaction volume—Main Market

IPO deal volume declines further

Twenty six companies within our scope completed an IPO on the Main Market in 2019, representing a 45% decrease from 2018 which saw 47 IPOs on the Main Market. From 2017 to 2018, Main Market IPOs decreased by 19%. The steep decline from 2018 to 2019 can largely be attributed to geopolitical tensions and political uncertainty in the UK but also part of a long standing trend of declining IPO markets across the globe.

UK IPO activity had seen some recovery in 2017 and 2018 after the low in 2016, the year of the UK’s Brexit referendum, which saw 28 Main Market IPOs but 2019 activity dipped down further still.

Although 2019 started slowly, the first half of the year was the busiest with June and July showing the most IPO activity (four companies listing in each month). Companies may have been keen to complete their IPOs after the delayed Brexit deadline in April 2019 and before the next deadline at the end of October 2019.

The last quarter of 2019 was subdued with the October Brexit deadline and general election likely to have had an impact on activity levels. This contrasts with the last quarters in 2017 and 2018 which showed more healthy IPO activity.

Gross proceeds and market capitalisation—Main Market

Gross proceeds and market capitalisation dip again

The aggregate market capitalisation of companies completing a Main Market IPO decreased from 2018 to 2019 by 40% (2018: £23,911m; 2019: £14,377m). The percentage decrease from 2017 to 2018 was similar at 35% (2017: £37,023m).

The average market capitalisation for a company listing on the Main Market in 2019 was £553m which was up on the average for 2018 (£508m) but less than the average in 2017 (£638m).

The aggregate gross proceeds raised by companies on the Main Market on IPO decreased less sharply than aggregate market capitalisation by 19% from 2018 to 2019 (2018: £5,020m; 2019: £4,054m). The decrease in aggregate gross proceeds from 2017 to 2018 was more significant at 38% (2017: £8,055m).

Despite the decrease in aggregate gross proceeds from 2017 to 2019, average gross proceeds raised per company in a Main Market IPO in 2019 was £156m which was up on the average for 2018 (£107m) and 2017 (£139m).

Top three Main Market IPOs by market capitalisation

The top three Main Market IPOs for 2019 in terms of market capitalisation were Airtel Africa plc, Network International Holdings plc and Trainline plc. Even with Brexit on the horizon, international companies such as Airtel Africa (providing telecommunications services in Africa) and Network International Holdings (a payments solutions provider in the Middle East and Africa) continued to be attracted to the Main Market. Airtel Africa was valued at £2.74²ú²Ô on admission and also listed on the Official Trading List of the Nigerian Stock Exchange.

Both Network International Holdings and Trainline had cornerstone investors which agreed in advance to take up shares in the IPO: Mastercard took a 9.99% stake in Network International and Baillie Gifford (on behalf of underlying cornerstone investors) took a 11.9% stake in Trainline.

In 2018, the largest IPO in terms of market capitalisation was Aston Martin with a market capitalisation of £3.9bn. In 2017, it was Allied Irish Banks plc valued at £11.2bn which has been the largest London IPO since 2011.

The combined market value of the top three IPOs in 2019 amounted to £7,343.3m which represented 51% of the total aggregate market capitalisation of all companies completing an IPO on the Main Market in that year. In 2018, the top three represented 38% of total aggregate market capitalisation. In 2017, the top three represented 62.5% skewed by the significant sized Allied Irish Banks float.

Top three Main Market IPOs by gross proceeds

The Chinese securities group, Huatai Securities Co Ltd, was the largest Main Market IPO in 2019 in terms of gross proceeds raised by the company. It listed global depositary receipts (GDRs) in London under the Shanghai-London Stock Connect cross-listing mechanism in June 2019. Huatai Securities was the first company to make use of the Shanghai-London Stock Connect which allows Shanghai listed companies to issue GDRs on the London Stock Exchange and London-listed companies to issue Chinese Depositary Receipts in Shanghai.

Huatai Securities raised £1.3²ú²Ô, one and a half times more than the largest IPO in terms of gross proceeds for 2018 (Smithson Investment Trust plc which raised £822.1m) and just over the £1.2bn raised by EN+ Group plc in its GDR issue in 2017.

The top three 2019 IPOs in terms of gross proceeds raised £2,307.1m in aggregate which represents 57% of all new money raised in Main Market IPOs in 2019. In 2018, the top three raised £1,646m (33%) and in 2017, the top three raised £2,803m (35%).

Range of gross proceeds

In 2019, 42% of Main Market IPOs raised over £100m. In both 2018 and 2017 the percentages were lower at 27% and 31% respectively. This indicates an increase in the proportion of companies raising higher levels of gross proceeds in 2019 compared to the previous two years.

One company in each of 2017 and 2019 raised over £1bn (and both were GDR issues by overseas companies) whereas 2018 did not see any companies reach the £1bn mark.

Range of market capitalisation

Unfavourable market conditions appear to have deterred an increased number of smaller companies from listing on the Main Market. Companies listing with an opening market capitalisation below £100m in 2019 made up a lower percentage of all Main Market IPOs than in previous years, with 38% of transactions falling into this range, compared to 42% in 2018 and 48% in 2017.

In 2019, six companies were valued at over £1bn (and two over £2bn) on IPO representing 23% of all Main Market IPOs. In each of 2018 and 2017, seven companies achieved a market capitalisation of over £1bn on IPO (representing 15% and 12% respectively of all Main Market IPOs in the year). Our findings show that the proportion of larger companies, with a market capitalisation over £1bn, coming to the Main Market increased in 2019.

In 2018, five companies came in at over £2bn with Aston Martin at over £3bn. In 2017, three companies had a market capitalisation of over £2bn on IPO and these were all considerably larger — notably Allied Irish Banks plc with a market capitalisation of over £11bn.

Industry focus—Main Market

Investment sector continues to dominate Main Market activity

The investment sector dominated Main Market IPOs in 2019 as it did in 2018. The next most popular sectors represented were the financial services and professional services sectors with three companies listing in 2019 in each sector. The second most popular sector in 2018 was the financial services sector.

Investment sector

Ten Main Market IPOs (38%) in 2019 were in the investment sector. Four of these were special purpose acquisition vehicles (SPACs) and listed on the standard segment of the Official List. In our review we provide further analysis on the companies listing on the standard segment of the Official List in 2019.

Two companies in the investment sector were admitted to the specialist fund segment of the Main Market for highly specialised investment entities.

The ten investment sector Main Market IPOs in 2019 raised £1.2bn in aggregate representing 30% of all funds raised in 2019 Main Market IPOs.

Financial services

The financial services sector saw three companies complete Main Market IPOs in 2019: Huatai Securities, Finablr and Zaim Credit Systems.

These companies raised £1.5bn in aggregate representing 37% of all funds raised in Main Market IPOs in 2019. £1.3²ú²Ô of this was raised by Huatai Securities which was the top grossing Main Market IPO in 2019 raising more than double the amount of the second highest grossing 2019 Main Market IPO (Airtel Africa).

Professional services

The three professional services firms (DWF, Network International and Everarc Holdings) completed Main Market IPOs in 2019 and raised £333m in aggregate representing 8% of all funds raised in Main Market IPOs.

Media & telecommunications

2019 saw two IPOs in the media and telecommunications sector: Airtel Africa and Helios Towers. Both companies provide telecommunications services in Africa. Helios Towers first announced an intention to float on the Main Market in early 2018 but within two weeks of that announcement postponed its IPO. It listed in October 2019 following Airtel Africa’s float in July 2019.

Mining

The two companies in the mining sector completing Main Market IPOs both listed on the standard segment of the Official List. Ferro-Alloy, the Kazakhstan based vanadium mining company, raised £5³¾ and Metalnrg, investing in the natural resources sector, raised just over a quarter of a million.

These were both considerably smaller in terms of market capitalisation and gross proceeds raised than the mining sector companies listing on the Main Market in 2018 and 2017.

JSC NAC Kazatomprom, the Kazakhstan based uranium producer, listed in 2018 raising £311m for the company and was the third largest company in terms of market capitalisation that year (£2,411m). 2017 saw two Main Market IPOs in the mining sector: En+ Group which raised £1.2bn and had a market capitalisation of £5.5bn on admission and Polyus PJSC which raised £433m and achieved a market capitalisation of £6.3bn.

Top ten Main Market IPOs by gross proceeds

The investment sector was also best represented in the top ten Main Market IPOs by gross proceeds in 2019 with five companies from that sector appearing in the list.

Top ten Main Market IPOs by market capitalisation

Although the investment sector dominated the top ten list of 2019 Main Market IPOs by gross proceeds raised, when looking at the top ten companies by market capitalisation a more diverse range of industry sectors was seen. Two companies from each of the media & telecommunications sector, financial services sector and investment sector made it into the top ten by market capitalisation.

Country of incorporation and operation—Main Market

The majority of companies completing Main Market IPOs in 2019 were incorporated in England & Wales as was the case in the previous two years. As noted above, 2019 saw the first Chinese company, Huatai Securities Co Ltd, list on the Main Market under the Shanghai-London Stock Connect cross-listing mechanism with its issue of GDRs.

The spread of countries in which the companies listing in 2019 operate was much broader than the countries of incorporation represented (as also seen in the previous year). Brexit worries did not seem to deter international businesses from listing in London such as Metalnrg plc (United States), Airtel Africa plc (Africa), Network International Holdings plc (Middle East & Africa), Ferro-Alloy Resources Limited (Kazakhstan), Zaim Credit Systems plc (Russia) and Huatai Securities Co Ltd (China).

Transaction volume—AIM

AIM IPOs come in at record low

2019 was a disappointing year for AIM IPOs. From 50 AIM IPOs in 2017 and 42 in 2018, the total number plummeted to ten in 2019 which was 76% down from the previous year. This was a record low for London’s growth market and even lower than 2009 which saw 13 AIM IPOs.

The decrease from 2018 to 2019 was much more marked than the decrease in Main Market deal volume at 45%.

This graph further shows how subdued the AIM IPO market was throughout 2019 with the first quarter being the quietest, only recording one IPO. Four AIM IPOs completed in the second quarter of 2019, followed by two in the third quarter and three in the last quarter of the year.

The largest AIM IPO in 2019 in terms of both market capitalisation and gross proceeds raised, Uniphar plc, completed in July.

The second quarter of 2018 was also the busiest for AIM in that year. In 2017, the last quarter of the year saw the most AIM IPOs take place.

Gross proceeds and market capitalisation—AIM

Despite large fall in gross proceeds and market capitalisation, AIM attracts larger companies

The aggregate market capitalisation for AIM IPOs in 2019 was £1,276m which marks a 64% decrease from 2018 (£3,576m). The percentage decrease from 2017 to 2018 was much less marked at 16%.

The average market capitalisation for a company listing on AIM in 2019 was £128m which was up on the average for 2018 and 2017 (around £85m in each year) which indicates that in the challenging conditions seen in 2019, relatively larger companies were coming to the market than in the previous two years.

Aggregate gross proceeds raised by companies in AIM IPOs in 2019 was £417m which was down by 61% from the figure for 2018 (£1,066m). Aggregate gross proceeds decreased by 23% from 2017 to 2018 (2017: £1,380m).

The average gross proceeds raised by a company listing on AIM in 2019 was £42m which was up on the average for 2018 (£25m) and 2017 (£28m).

Top three AIM IPOs in 2019

The top three AIM IPOs in 2019 in terms of both market capitalisation and gross proceeds were Uniphar plc, Loungers plc and The Pebble Group Plc. Uniphar plc, the established healthcare services business headquartered in Ireland, also listed on Euronext Dublin and raised £121³¾ in gross proceeds and was valued at £299³¾ on admission.

In 2018, the largest AIM IPO by market capitalisation was Codemasters Group Holdings plc, a video games developer, with a market capitalisation of £347m and by gross proceeds was Yellow Cake plc, the uranium trader, which raised £151m.

Range of gross proceeds

Most companies (60%) completing an AIM IPO in 2019 raised less than £50m. This was also the case in 2018 and 2017 although the proportion of companies in this range bracket was higher.

In 2019 and 2018, no AIM company raised more than £200m. In 2017, the highest grossing AIM IPO was Irish investment company Greencoat Renewables Plc which raised £238m.

Range of market capitalisation

The most popular market capitalisation range for 2019 AIM IPOs was £150m to £200m. In each of 2018 and 2017, the £25m to £50m range was the most popular.

In 2019, most companies (60%) coming to AIM were valued at over £100m on admission. In 2018 and 2017 fewer companies coming to AIM had a market capitalisation of more than £100m (2018: 33%; 2017: 30%). Although the number of companies coming to AIM dropped drastically in 2019, the proportion of companies with a market capitalisation of over £100m increased.

Industry focus—AIM

There was diversity in industry sector in companies completing an AIM IPO in 2019 but the most popular was healthcare with three AIM IPOs. The healthcare sector also saw the largest AIM IPO in terms of market capitalisation and gross proceeds (Uniphar plc). The other two 2019 healthcare sector AIM IPOs were Diaceuticals plc, a Belfast-based data analytics company, and Induction Healthcare Group plc, a healthcare technology company which has developed an app to help healthcare professionals communicate with each other.

The popularity of the healthcare sector for 2019 AIM IPOs can be contrasted with 2019 Main Market IPOs where the investment sector was the most popular with 38% of companies listing in that sector. No investment sector company was admitted to AIM in 2019 (although Longboat Energy plc, which is categorised in the Oil & Gas industry sector, is newly incorporated and regarded as an investing company for the purposes of the AIM Rules for Companies). Four newly incorporated investment sector companies completing 2019 Main Market IPOs were admitted to the standard segment of the Official List.

Country of incorporation and operation—AIM

AIM saw much less geographical diversification in 2019 in terms of companies’ country of incorporation and country of operation than in 2018. In 2019 all ten companies which completed an AIM IPO were incorporated and operated in the UK, Ireland and/or Channel Islands. In 2018, AIM attracted a variety of international companies with operations in Europe, Africa, Australia, US, UAE and Asia Pacific.

Full list of 2019 IPOs included in this report

2019 Main Market IPOs

2019 AIM IPOs