Numis Corporation PLC (AIM:NUM) told the market what most of its participants already probably guessed - the IPO market is closed for business, while it continues to be tough for small- and mid-cap companies to raise cash.
The mini-investment bank, which is being taken over by Deutsche Bank, provided a fairly dour assessment of prospects after a tough third quarter's trading.
Cold comfort for those left to battle on, what this statement will have done is vindicate the decision by investors to take the £410mln deal from the Germans rather than continuing to back Numis as an independent entity in an arena that's seemingly in secular decline.
Defensive merger
So tough is it out there that two of its London-listed rivals, finnCap and Cenkos, have opted to pool their respective resources with a defensive merger.
In its update on Wednesday, Numis did little to lift the spirits as it reported a decrease in total revenue for its financial third quarter of 2023.
Despite challenging financial markets, the bank's mergers and acquisitions (M&A) revenues have remained robust, even outperforming the corresponding period in the previous fiscal year.
However, the strong M&A revenues have been offset by weaker capital markets revenues, as macroeconomic uncertainties have led to an extended period of unusually low deal volumes and a closure of the initial public offering (IPO) market.
Cautious sentiment
Furthermore, equities revenues for Q3, including commissions and trading gains, were lower due to cautious sentiment among UK investors.
This reflects a subdued equity market and continued outflows from UK-focused institutional investors, who manage funds for institutions like pension funds or insurance companies.
Looking forward, Numis anticipates these macroeconomic concerns to continue affecting deal volumes across all investment banking products in the final quarter of its financial year.
Strong balance sheet
However, the bank's balance sheet position remains strong, with ample liquidity and a robust capital foundation. Numis is focusing on expanding its corporate client base, engaging with clients across the business, and building its pipeline to position for growth when market conditions improve.
Meanwhile, the bank's acquisition by Deutsche Bank is set to complete during the final quarter of this calendar year, following shareholder approval.