If party season in the Square Mile looks set to be a washout again this year, at least its inhabitants (the bankers, lawyers and accountants) have plenty of work to occupy them in the coming few weeks with a slew of late IPOs ready to go live.
Normally, December is a quiet period for new listings. Not so this time around. In all, we are expecting 11 flotations between now and the end of 2021, according to the London Stock Exchange’s pages tracking new issue activity.
All are set to join the junior AIM market, which has grown at such a rapid pace this year that there may be a little post-yuletide indigestion.
Nervousness?
Does the rush to float businesses in December betray a nervousness among London’s banks and brokerages that 2022 may be a tougher year on the capital markets?
It should be noted the LSE’s diary thus far contains just one IPO early next year – Recycling Technologies Group - which suggests City advisors are keeping their powder dry.
The macro picture appears unsettled – but then when hasn’t it in the last two years?
Niggling at sentiment are the following are a bunch of issues already apparent today.
Analysts will tell you that the continuing impact of Covid (and its various mutations), inflationary pressures, higher borrowing costs and the tapering of US asset purchases all potentially pose a threat to global equity markets.
Perhaps the overriding fear is we are nearing a point where the US markets start to feel gravity’s pull.
Helium-filled tech market
For example, the seemingly helium-filled Nasdaq 100 is up over 200% in the last five years, the S&P 500 has doubled in value in that time and even the Dow Jones Industrial Average, a hodgepodge of ex-growth stocks, is up 80% on 2016 levels.
There have been mutterings for months (if not several years now) that the Nasdaq, in particular, has been overhyped and overbought.
Certainly, a price-to-earnings multiple of 36-times looks a little toppy, so the nerves are understandable.
A reset Stateside would inevitably be felt around the world, with London eminently susceptible to contagion (of the market variety).
Dip or dive?
History tells us that any dip or dive on the secondary market for shares will almost instantaneously impact fundraising efforts.
Still, it has been a good year for IPOs. To date, we have seen 114 LSE floats, raising just under £25bn of new capital for these now-public businesses. That’s the best showing in 12 years. And for AIM, the last time we saw this sort of activity was in 2007.
Earlier this month the Financial Conduct Authority announced a new set of rules that could encourage more companies to list in London.
They relax former edicts on the free float of stock and dual share structures and are aimed at encouraging the best of British tech to IPO on home turf.
Will they help maintain the momentum? It’s possible, but at the point in time, those in the know are focused on one thing – facilitating the rush to get the remainder of 2021’s IPOs done and dusted.