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London market set for IPO bonanza

The first few months of 2021 are shaping up to be a busy period for new entrants to the London market as both big and small names look to tap investors for cash

Card Factory - London market set for IPO bonanza

The London market is set to experience a flurry of new initial public offerings (IPOs) in the coming months as upstart and established brands across the spectrum have lined up to tap the market at the start of 2021.

On Monday morning, iconic bootmaker Dr Martens Ltd confirmed plans for its own float on the London Stock Exchange in early February which some reports have estimated could see it valued at around £1bn.

READ: Dr Martens confirms plans for LSE listing

Owner Permira, which took control of the business for £300mln in 2013, is looking to sell stake in the group, which last year generated sales of £672mln and pre-tax profits of just over £100mln.

This was preceded last week by online greeting card retailer Moonpig Group, which is planning to float a 25% stake in the firm after a strong performance in 2020 that saw its revenues for the six months to October 31 surge 135% to £155.9mln.

READ: Moonpig unveils IPO plans

While it is rumoured that Moonpig could attract a market valuation of £1.5bn with it IPO, some have cautioned that the recent state of the sector does not bode well, with competitors such as Paperchase falling into administration while Card Factory PLC (LON:CARD) said in a trading update last Thursday that sales for the eleven months to December 31 had plummeted by almost 50% to £281.4mln, although this was mostly attributed to a sharp slowdown in retail store sales due to lockdown measures, which offset strong gains from online.

Meanwhile, another well-known brand, takeaway app Deliveroo, is lining up its own listing with a report last week saying the Amazon-backed firm has hired four major investment banks to assist in the IPO.

READ: Deliveroo hires four investment banks in preparation for IPO

Deliveroo has been steadily inching its way towards an IPO as it looks to tap the market for funds to pursue an expansion strategy and battle its main rivals Uber Eats and Just Eat Takeaway.com NV (LON:JET).

The app currently boasts around 45,000 restaurants on its platform and recently unveiled plans to expand into 100 more towns and cities across the UK in 2021.

Takeaway delivery firms like Deliveroo have seen a boom in business over 2020 as lockdown restrictions forced restaurants to close their doors and left most proprietors relying on takeaway orders to stay afloat.

Meanwhile, French state-backed energy firm EDF is also rumoured to be entering the fray, with reports over the weekend saying the company is drawing up secret plans to list Pod Point, a provider of electric vehicle charging infrastructure in which it bought a controlling stake last year.

Away from the big names, there is also IPO action circulating in the small-cap space.

Among those seeking to float include Foresight Group, an infrastructure and private equity investment manager that is targeting a listing on the premium segment of the main market.

Others on the list are Cornish Metals, currently listed in Canada, which is looking to float on the AIM market and raise £5mln to advance its United Downs copper-tin project in Cornwall, as well as sustainable energy infrastructure investment firm VH Global Sustainable Energy Opportunities, which is targeting a premium main market listing.

But staying power may be up for debate

While the upcoming IPOs may provide some excitement for London’s investors, some are warning that history may be at risk of repeating itself.

Michael Hewson at CMC Markets highlighted that 2014 had been another “decent year for IPOs” with flotations from the likes of Patisserie Valerie, Poundland, Just Eat, Pets At Home PLC (LON:PETS) and AO World PLC (LON:AO). However, since then, only two have remained on the market in their original forms while the rest have either gone bust or been snapped up by competitors.

Hewson added that recent public listings involving private equity firms selling their stakes on the public market have also “saddled newly floated business with lots of debt, which subsequently has proved too onerous to pare down, resulting in the subsequent failure of the said business”. Examples he highlights include defunct department store chain Debenhams as well as breakdown recovery group the AA PLC (LON:AA.).

“Let us hope that these new IPO’s turn out to be the first of many for the London market this year, however, their success is likely to be more dependent on obtaining a realistic valuation, than any economic recovery story over the rest of this year”, he concluded.

Quick facts: Card Factory

Price: 61.5 GBX

LSE:CARD
Market: LSE
Market Cap: £210.1 m
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