The atrium of the London Stock Exchange Group offices in London, United Kingdom. The number of companies listed in London fell by 67% in 2022.
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LONDON — Funds raised by London-listed companies have fallen by more than 90% this year, according to a new study.
Analysts said the market had cooled on weak economic growth forecasts, rising interest rates and caution about UK company performance.
There are 40 companies listed on the London Stock Exchange’s main and alternative investment markets year-to-date, according to data released by KPMG on Wednesday. That’s down from 123 last year but up from 38 in 2020. Total funds raised fell to £1bn from £14.3bn ($17.7bn), according to the study.
This comes amid a broader slowdown in IPOs, which are down 45% year over year globally for the first three quarters, according to S&P Global.
Listings on European Union-based exchanges have fallen by a similar proportion as the UK so far this year, around 66%, according to figures provided to CNBC by market data firm PitchBook.
However, London has failed to achieve blockbuster IPOs raising more than £1billion. The EU saw Porsche Mammut collect 19.5 billion euros on his Frankfurt debut in September.
Previously released figures for the first nine months of the year put the fall in funds raised in Europe at between 76% and 80% annually, suggesting a less steep fall than the UK’s 93%.
As in other economies, inflation in the UK has risen to a 41-year high and the central bank has started raising interest rates. But it has also been rocked by political instability, the chaos in its bond market, the ongoing trade and regulatory complexities of Brexit, and forecasts of the longest recession on record.
“The spate of IPOs we saw in 2021 turned into more of a drought this year as unfavorable macro conditions and a sense of investor fatigue created a perfect storm that eventually shook the UK and global IPO markets later in 2022,” Svetlana Marriott, head of KPMG UK’s Capital Markets Advisory Group, said of the figures released on Wednesday.
Last year saw a record number of IPOs worldwide and activity in Europe shot to a 10-year high.
Nalin Patel, senior analyst for EMEA private capital at PitchBook, said companies have “rushed to the list over the past year to take advantage of favorable market conditions and pandemic-led growth.” But in 2022, Marriott continued, investors may have been cautious after the poor performance of several IPOs.
High profile London debut in 2021 including fintech companies Waydelivery service Deliveroo and shoemaker Dr. Martens, are all well below their list prices. Cyber Security Company dark trail has also slipped from a post-IPO rally.
UK regulators introduced a series of reforms in December 2021 to address longstanding criticism. These opinions, detailed in a government report, suggested the UK stock market misunderstands and undervalues innovative technology companies, consists mostly of “old economy” companies rather than forward-looking ones, and is increasingly losing business to the likes of Amsterdam and Paris.
Reforms included that companies listed on the main market have some form of two-tier share structure (to attract more founder-run companies); reducing the number of shares required for free float; and increasing the minimum market capitalization for ordinary trading companies in their main and standard segments from £700,000 to £30 million.
In the volatile year since, market trends have been driven more by global forces than regulatory action. Marriott said the best-performing sector in the UK is energy and natural resources, which accounted for 20 IPOs.
“But the forecast for next year may not be quite as stormy as we see many already preparing to return to stable economic conditions,” she said.
“We expect public listings to remain subdued in 2022,” said PitchBook’s Nalin Patel. “However, companies in the energy sector may be looking to capitalize on increased focus and profits and seek an exit.”
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