Peel Hunt IPO Speedometer – Market Remains ‘Selectively Open’
We are publishing the third edition of the ‘Peel Hunt IPO Speedometer’, which, based on a proprietary model with over 30 qualitative and quantitative inputs, gives a numerical score (0-60mph) for the health of the UK IPO market.
This month, the speedometer has accelerated modestly to 29mph, up from 27mph in June. The speedometer remains in second gear, classifying the UK IPO market as “selectively open” as it edges closer to being more widely open.
The key drivers of the model this month were: the successful re-opening of the UK IPO market with positive aftermarket performance, continued mixed success of the European IPO recovery, a constructive broader UK ECM backdrop, improving UK investor sentiment and improving overall fundamentals for the UK.
The start of August saw a meaningful global market sell-off and spike in volatility on the back of investor concerns around global growth and central banks’ cutting trajectory. Although we have seen a partial rebound and limited investor panic, market activity and macro data will need to be monitored to assess if it will have any impact on the IPO market. We continue to maintain that the UK IPO market is ‘selectively open’ for either best-in-class issuers or certain niche thematics that resonate. We expect a small number of further UK IPOs in 2024 but do not expect a broader re-opening until 2025.
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UK IPO market has successfully re-opened The last two months have seen the successful pricing of the first notable UK IPOs (ex-GDRs) in 2024 (Raspberry Pi, AOTI and cash shell Rosebank), following what has so far this year been a European-led IPO recovery. As these UK deals have all traded up it shows clearly that the IPO product is working for select UK issuers and has made investors money, boosting confidence.
Broader UK picture more constructive for IPOs There was a notable shift in investor sentiment on the UK in recent months, helped by relative political stability and improving macro conditions. Although fund flows remain negative on a headline basis, they are decreasing significantly, and we are seeing more positive flows beneath the surface. This more positive overall UK picture has helped support the further acceleration of the IPO Speedometer to 29mph.
Broader re-opening expected in 2025 Although recent activity has been positive for UK IPOs, we are expecting the pipeline for H2 to be relatively selective. This is in line with Europe where the pipeline is not as strong as what we witnessed in H1, which included a number of flapship jumbo deals. This is largely a function of where companies are in their IPO preparation. We continue to expect a broader UK IPO market re-opening in 2025, in line with many issuer conversations we are having at Peel Hunt.
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Key drivers of the model this month
Re-Opening of the UK IPO Market
After a European-led IPO recovery in Q1, Q2 saw the launch of the first notable UK IPOs of the year (ex-GDRs). We mentioned in June’s edition that how those deals traded in the aftermarket would set the tone for the broader UK IPO pipeline. Thankfully, all three deals traded positively: Raspberry Pi and Rosebank made significant returns for investors (Figure 1).
Peel Hunt acted as Joint Global Coordinator on the Raspberry Pi IPO and as Sole Global Coordinator on the AOTI IPO. The reception from investors has been positive on UK IPOs, with strong demand from the UK long only community, supplemented by international interest. The hedge fund bid remains strong, as it has been for some time. Cornerstone and anchor orders have been important in pricing many of these deals, also highlighting the ability of certain investors to place large order sizes. In the case of Raspberry Pi, there were cornerstone commitments from Arm ($35m) and Lansdowne ($20m).
It has not all been plain sailing, however, with the ￡500m UK real estate IPO for Special Opportunities REIT pulling their deal. We would note that this is an investment company and a relatively specific situation.
Although we have now seen a number of successful UK IPOs, we maintain that the market is ‘selectively open’. Those situations that have priced have been relatively niche thematics and/or particularly high quality companies. We are not yet in a market that is open for everyone, but are making positive progress towards a broader re-opening.
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European IPO Recovery Continues with Mixed Success
European IPO issuance has been more muted over the past two months (Figures 2 and 3) compared with the more significant activity earlier in the year. This was a combination of a decreasing near term pipeline following the jumbo issuance earlier in the year and the more mixed reception to some of the mid cap names that attempted to come to market.
There were pulled/postponed IPOs for a number of issuers across Europe including Golden Goose (Italy, luxury sneakers), Europastry (Spain, frozen bakery) and Tendam (Spain, fashion retailer). These issuers cited various reasons including market volatility following elections/political turmoil and a valuation disconnect with investors.
With a number of deals being pulled post launch following deal coverage messages, it is clear that there is an issue with deal transparency, particularly around quality of demand and valuation visibility ahead of launch. On the Raspberry Pi IPO (where PH was a JGC), there was a coverage message on Day 1 based on long only and cornerstone demand only, which was welcomed by the market.
Despite these pulled deals, there is a sense that the European IPO market is still constructive but is lacking in supply for now. Those deals that have priced are trading well, with 72% of European IPOs YTD currently trading up.
There remains a pipeline of deals for H2, although it is less significant than earlier in the year, with much of the expectation around pipeline focussing on 2025. This is a function of both where companies are in their IPO preparation, but also a wish to avoid the potential market volatility around elections in Europe.
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UK ECM Activity Continues to Broaden and Work Well
Beyond IPOs, broader UK ECM continues to work well with significant issuance volumes and strong aftermarket performance. Over the past two months we have seen a range of deals across primary capital raisings and secondary selldowns, and also across jumbo, mid and small cap issuers. The average one week aftermarket performance of these deals has been 9% (Figure 4), making investors strong returns and helping with sentiment across the ECM product.
During this period, Peel Hunt acted as Joint Global Co-Ordinator on the ￡150m primary capital raise for Sirius Real Estate, the 10th capital raising we have completed for them since the IPO in 2007.
Overall UK ECM issuance (ex-IPOs) continues to be well-ahead of other European regions (Figure 5), with over $20bn of issuance YTD in the UK, c.3x the next highest region (Germany) and +91% vs. the comparative period last year. The previous pushback was that UK ECM issuance was focussed on a small number of jumbo issuers (e.g. LSE, Haleon) but whilst the jumbo issuance continues, we are also seeing increasing issuance across the small and mid cap space.
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UK Investor Sentiment Improving Despite Ongoing Headline Outflows
Improving investor sentiment on the UK has also led to a significant reduction in equity outflows. Although July was the 38th consecutive month of UK domestic outflows (source: Calestone), it represented the smallest outflow (￡207m) in three years as confidence grows. It also represented both a reduction in selling by existing holders and an increase in buying, a positive dynamic.
Despite the ongoing headline outflows, there has been notable pick up in investor sentiment over recent months, helped by the improving backdrop and general positive performance of equity markets (and the UK specifically). We have seen an increased willingness from PMs to put money to work and increase exposures in the short term, particularly in the most undervalued/hardest hit sectors. Anecdotally, we are also observing more inflows on an individual fund basis, even if not represented by the headline numbers.
Although the flows have not yet followed this sentiment shift (Figure 6), there is an expectation that these will follow. The ongoing ‘summer marketing period’ for PMs will be the next test for that better sentiment to convert into meaningful new domestic cash available for UK equities.
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Improving Overall Fundamentals of the UK
We are seeing increased investor confidence around the UK, helped by a number of factors:
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We note the recent poor global equity market performance and spike in volatility since the start of August, driven by US growth concerns and geopolitical tensions. It is a reminder that the UK market is global and open to international forces. This follows a significant extended bull run in stocks and also coincides with a quiet month for ECM issuance in August. We will have to monitor how markets progress over the coming weeks to evaluate what the impact might be on near term ECM activity, which we note is expected to be selective on the IPO front.
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Confirmation of New Listing Rules
Earlier in July, the FCA published the final new UK Listing Rules (UKLRs). This represents a significant change in the UK listing regime which we believe will attract more companies to list in London. At a minimum, it should reduce the number of relevant companies that list abroad due to differences in listing rules, bringing the UK more in line. The listing rules represent one of many improvements required for UK equity markets, but it’s a positive step. The final rules were published on 11 July and were implemented on 29 July 2024.
Although the vast majority of these changes were highlighted in previous updates, it was positive to have them confirmed and finalised.
There is now a single listing segment for commercial companies ("ESCC") to replace the previous distinction between premium and standard listed companies. Some of the other key changes for commercial companies include:
We are having a number of discussions with potential issuers who are finding these updates helpful, particularly around financial requirements for listing. The movement towards a more disclosure-based regime over a rule-based one has been welcomed by most investors, who tend to prefer making the judgement call themselves and give more flexibility to companies to attract listings.
Commentary on Other Inputs This Month
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Potential UK IPOs
The following companies are rumoured in the press to be considering a UK IPO over the short-to-medium term (with many considering other exchanges too).
There have been a number of new potential pipeline IPOs added recently with a number of themes emerging:
Strong presence of financials and fintech companies
Number of international companies looking at listing in the UK
Corporate spin-off theme prominent in both the potential European and UK IPO pipelines
International listing debate continuing (US vs. US in particularly), principally at the more jumbo end of issuers
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Company - Source
Anglo American De Beers - CityA.M.
Applied Nutrition - Sky News
Boots - Bloomberg
Canal+ - FT
Canopius - The Insurer
Ebury - Bloomberg
FNZ -Citywire
Internet Mobile Communications - The Times
Klarna - Sky News
Metlen - The Telegraph
OakNorth - Financial News
Shein - FT
Starling Bank - Finance Magnates
Thought Machine - CityA.M.
Unilever Ice Cream - Unilever
Waterstones - FT
Zilch - Bloomberg
Zopa - The Times
Background to the PH IPO Speedometer
The IPO speedometer is a tool for potential issuers, shareholders and investors to accurately assess the current health and outlook of the UK IPO market. Based on a proprietary model with over 30 qualitative and quantitative inputs, it gives a numerical score (0-60mph) for the health of the UK IPO market. It is published on a bi-monthly basis.
PH IPO Speedometer scale
Methodology and inputs for the PH IPO Speedometer
In order to calculate the speed of the Peel Hunt IPO Speedometer in any month, we assess datapoints across eight main buckets, giving each bucket an overall score. These buckets are then split into primary and secondary drivers of the UK IPO market and a weighting (depending on their importance) is assigned to each overall score. This then provides us with the output in the 0-60mph range. The eight main buckets and their inputs include the following:
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