Could London's late IPO flurry mark a turning point?

By Charlie Conchie

LONDON (Reuters) -A flurry of listings on the London Stock Exchange this week has raised hopes of a revival after one of the most sluggish years on record, bankers and advisers said.

In the nine months to the end of September, London hosted only three IPOs on its main market, putting it at risk of its worst year yet for new share sales as companies either stayed private or opted to list in the United States and Europe in pursuit of higher valuations.

But on Friday, Cheshire-based cosmetic company the Beauty Tech Group, known for its LED red light face masks, floated on the London Stock Exchange at a valuation of 300 million pounds ($403.41 million), while tinned tuna and Napolina owner Princes Group confirmed plans to list its shares. 

Shares in Beauty Tech Group bounced more than 5% in early trading, placing it among the top 10 gainers across the London Stock Exchange. 

Alternative lender Shawbrook is also expected in the coming days to file an application for an IPO that the market has long anticipated, sources told Reuters. Fermi, a data centre start-up run by former U.S. energy secretary Rick Perry, listed its shares on the London Stock Exchange on Thursday after an IPO on Nasdaq earlier in the week. 

COMPANIES HAVE FAVOURED MAINLAND EUROPE AND US

"There has been interest from investors wanting to put money in but there was just a lack of companies seeing an IPO as a proper alternative to other forms of funding,” Julian Morse, co-CEO of investment bank Cavendish, told Reuters. 

“That pendulum seems to have swung, and these listings will really help. In the last few months, we've definitely seen an acceleration of companies coming to us seriously considering IPOs." 

The slowness of Britain's economic recovery and a perception its stock market is undervalued have meant London, which was Europe's most popular listing venue in the boom of 2021, has attracted only 2% of all European IPO volumes since January, with Zurich and Frankfurt the busiest venues in Europe, Dealogic data showed.

The market has also been hit by take-private deals and high-profile firms swapping their primary listings to overseas markets, including fintech company Wise. AstraZeneca, one of Britain’s most valuable companies, unsettled some advisers and analysts this week when it said it planned to upgrade its listing in New York. 

HEALTH TECH, FOOD AND FINANCING

The late rash of new debuts has, however, raised hopes that others may press ahead with listing plans in London. 

“If they can successfully build their books and trade well, this will unlock a more sustained pipeline, which is significant,” said Michael Jacobs, a capital markets lawyer at Herbert Smith Freehills Kramer. 

Beauty Tech Group CEO Laurence Newman told Reuters on Friday he hoped the IPO would prove a turning point.

“It’s encouraging to see the range of businesses coming to market across health tech, food and financing,” said Charles Hall, head of research at investment bank Peel Hunt. “This should be just the start - we are actively engaging with a number of exciting float candidates, which should help to put London back at the top of the league table.” 

Ministers and regulators have looked to overhaul the London Stock Exchange’s listing rules to try to tempt more firms to come to market.

Advisers, meanwhile, say larger deals in the next year could be a further spur. They include software company Visma, whose private equity owner Hg has provisionally chosen London, in a deal that could value it at around $20 billion.

($1 = 0.7437 pounds)

(Reporting by Charlie Conchie; editing by Anousha Sakoui and Barbara Lewis)