After London experienced its worst year for flotations for almost three decades, this morning saw green shoots emerge as a pair of initial public offers were announced.
The larger of the two is likely to be Air Astana Group at a mooted US$1 billion (£780 million), which is expected to include new shares and an exit for 49% shareholder BAE Systems.
Bookbuilding and a roadshow by investment banks Citigroup and Jefferies are expected to be launched around the end of January, along with an announcement of the expected issue price range, the company said.
Also announcing its intention to float was The London Tunnels PLC, which is aiming for a valuation of just over £120 million and seeking a listing on London's main market rather than AIM.
The company behind the project, which has already raised £10 million in pre-IPO funding, is looking to bring in up to another £30 million in investment at £2 a share.
It plans to "restore, adaptively reuse and bring back to life" the Kingsway Exchange Tunnels, which were built during World War Two 40 metres below High Holborn, which runs between Holborn station and Chancery Lane, as a bomb shelter.
Another company, MicroSalt PLC, delayed a planned IPO in the final quarter multiple times and has yet to confirm if it still planning to list or not.
The developer of a manufacturing process to enable smaller crystals, a subsidiary of Tekcapital PLC (LSE:TEK) advised on the float by broker Zeus Capital, had planned to list in October, before delaying that to mid-November and then mid-December.
Two swallows make an IPO summer?
Assuming these two deals make it over the line, it "will be a good test of risk appetite on this side of the Atlantic", said Russ Mould, head of investment at AJ Bell.
After 2023 saw just 23 IPOs on the London Stock Exchange, around half the number from the year before and the second lowest in almost three decades, news of two in the second week of 2024 comes as a relative torrent of encouraging news for the Square Mile.
The fourth quarter of last year saw not a single proper IPO in London, according to LSEG figures, though there were three reverse takeovers and one introduction from Aquis.
This was the worst quarter since the start of 2009, according to UHY Hacker Young, where partner James Astley said: "There are signs suggesting an upturn in UK IPOs could be on the horizon".
With inflation dropping sharply and raising prospects for a cut in interest rates, "IPOs could come back earlier than some expect", he said.
A further boost is December's proposed streamlining of the London listing regime from the City watchdog, which aims to make listing in the UK more attractive to companies.
The Financial Conduct Authority's new plans include abolishing the distinction between London’s premium and standard listing segments, as well as removing the requirement for shareholders to approve some large transactions or those with related parties.
“As seen in the US, companies will start to bring back IPO plans relatively quickly once they believe interest rate cuts are a realistic possibility," Astley said.
London vs New York
Talking of the US, this new test of the level of appetite for IPO risk in London comes as the new US listings from 2023 have started to rally and with more starting to gather for 2024, adds Mould.
He notes that the US suffered a drought of sorts in 2023, with 154 floats being the quietest since 2016, down from 181 in 2022 and the frankly enormous 1,035 in 2021.
Even if the number of deals still exceeded the number of new floats in London by some margin, Mould notes that a lot of the new stateside arrivals "not so much as floated as sank, share price wise".
That said, Arm Holdings PLC (NASDAQ:ARM) is now up by a third after a slow start and the Renaissance IPO ETF, which adds positions of the most significant US-listed companies after they go public, is up by 35% over the past year.
There have been two New York floats in 2024 – Roma Green arrived last week and Smith Douglas Homes went live last night – and four more are due in the next week or so.