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A quarter of the biggest companies in London’s bumper crop of 2021 listings have since left the stock market while those remaining have lost £10bn in value, highlighting the exchange’s struggle to retain top-tier businesses.
This week alone two businesses in the 2021 vintage have succumbed to cut-price takeovers.
Electric vehicle charging firm Pod Point, which floated with a £352mn market capitalisation agreed on Thursday to be bought for just £10mn by EDF. It followed chip designer Alphawave, which on Monday agreed a $2.4bn takeover by US semiconductor group Qualcomm, less than half the valuation at which it went public in May 2021.
Analysis by the Financial Times shows that eight of the 33 companies that raised more than £100mn by listing in London in 2021 have since been sold, delisted or fallen into administration.
The takeovers have deepened concerns about the London stock market’s health and added to fears about the UK’s ability to keep homegrown technology firms, such as Deliveroo and Darktrace which both struck deals to be taken over.
A boom in listings in 2021, both in the UK and globally, fuelled hope of a revival in public markets. Ministers in the Conservative government at the time hailed it as “a great year for IPOs” and Dame Julia Hoggett, boss of the London Stock Exchange, said it demonstrated the UK was “increasingly becoming one of the top destinations” for listings.
Charles Hall, head of research at stockbroker Peel Hunt, said the 2021 surge in listings had been extraordinary, partly because it was driven by the Covid-19 pandemic “when everyone thought that the way we lived, the way we ate and shopped had changed forever”.
But he said London’s problems in attracting and retaining listings were wider: “The pipeline of quality firms coming to market is also negligible. This isn’t a buyer strike in the market — the shop is empty.”
This week’s buyouts follow last week’s announcement by Wise, the £11bn fintech that listed in 2021 without raising new money, that it planned to switch its primary listing from London to New York citing the deeper liquidity of the US market.
Across all sectors, there have been 30 bids of more than £100mn for UK-listed companies this year, but only one initial public offering above that valuation, and just three in the whole of 2024, according to Peel Hunt.
Of the companies that raised more than £100mn through a London IPO in 2021 and which remain on the London market, more than a third have suffered a decline of at least 50 per cent in their market capitalisation since floating, raising the prospect of further takeovers at depressed valuations.
Dr Martens, which first traded at £3.7bn, is now worth just £738mn, while cosmetics group Revolution Beauty is being circled by Mike Ashley’s Frasers Group with its shares 95 per cent below their listing price.
Peel Hunt, which itself advises on corporate transactions including listings, now trades at about one-third of its 2021 listing price. Oxford Nanopore Technologies’ valuation has fallen by about two-thirds.
Of the more than 100 companies to IPO in London in 2021, two well-known names — online furniture retailer Made.com and fashion brand InTheStyle — later went bust.
Others have also been taken private at steep discounts to their 2021 IPO valuations. Maternity retailer Seraphine was sold to a Mayfair private equity firm for a tenth of the £150mn at which it debuted, while retailer Music Magpie was sold to AO World for £10mn after being floated for £208mn.
The prospect of London’s stock market being jolted into life this year by fast-fashion retailer Shein has faded and bankers caution that other mooted listings, including Shawbrook and Monzo, will not happen before next year.
City advisers say London’s IPO hopes for 2025 now rest largely on a tinned tuna business. Canned foods group New Princes is working with advisers on a £700mn listing.
Supporters of the UK market argue that other public markets globally are also being hit by the shift towards more companies staying private for longer as stockpiles of private capital swell.
Advisers also highlight that London was not the only market to have a surge in listings after the pandemic, only for some to perform poorly after floating. In the US, 2021 was marked by a boom in cash shells, or special purpose acquisition companies, for which investor enthusiasm later waned.
However, London’s market exodus, which last year reached its highest level since the financial crisis, extends beyond the 2021 cohort. On Monday FTSE 250 high-tech manufacturer Spectris also bowed to a £4.4bn takeover by American private equity firm Advent.