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Neil Mitchell

The IPO market: the year ahead

Throughout the pandemic, the focus of UK public markets has largely been to recapitalise companies and support their immediate needs for capital. Many have used the cash to future proof their operations and ultimately survive the turbulent period. In fact, according to Deloitte, in the first half of 2020 alone (Jan-Jun), 135 UK secondary offerings raised £14.7bn, up £9.8bn from the same period in 2019. In this blog, partner Neil Mitchell discusses the turbulence of 2020, the current state of the IPO market and what lies ahead.

The majority of UK markets slowed down in early 2020, and public listings were no exception. The reason for this was a combination of the impact of the coronavirus and also uncertainty around Brexit, with only eight companies listed on UK exchanges pre-September according to PitchBook. While the majority of investors have now adapted to Brexit, uncertainty will remain until the end of the transition period on January 1st.

Activity on European exchanges had also been slow, with just 119 listings over the same period, compared with 144 and 229 in 2019 and 2018, respectively. It was a very different story in the US however, where 236 IPOs took place over the same period, many of which were technology companies.

However, the UK saw a turning point in September when businesses in pandemic-proof sectors woke up to the opportunity in front of them and began their IPO journey. Ecommerce giant THG paved the way for a comeback of the UK IPO market, with a flotation valued at around £1.9bn. The technology firm saw shares jump 30 per cent during the first day of trading, making it the biggest UK IPO of 2020 and the biggest European ecommerce listing to date. Elsewhere, we have seen global giants Ant Group, Airbnb and Doordash all make their debut on public markets in recent months, in some of the world’s biggest ever floats.

If we look at predictions for the period ahead, we will likely see this trend continue and mirror the activity during the pandemic to date. We have already heard of Deliveroo’s intention to float in early 2021 following Amazon’s stake in the business earlier this year. Candidates in shielded sectors, such as technology, home improvement and healthcare, will plough on with preparations having experienced little disruption. Others that are more exposed to the pandemic will likely bide their time and look to impact once they can demonstrate stability and are confident in their forward trajectory.

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23.12.20