IPOs are on the way

Finally, some positive news on Initial Public Offerings (IPOs) from the London Stock Exchange Group (LSEG), with CEO, Julia Hoggett, stating at a Financial Times event yesterday that the pipeline was building.

Even more promisingly, the reason Hogget gave for the current dearth of IPOs in the UK is that companies are deferring listing to take advantage of new rules from the Financial Conduct Authority (FCA), aimed at reducing red tape and expediting the process of going public.

This is very different from the pessimistic narrative that has been peddled by the press in recent months. This squarely blames the lack of IPOs and increasing number of delistings on poor valuations relative to the US, resulting from an outflow of UK funds to other geographies and asset classes.

Admittedly London has had a tough couple of years. However, markets are cyclical, and money inevitably finds its way back to where the value is. Valuations are improving in the UK. The FTSE 100 is currently trading at an all-time high and the FTSE All Share and AIM All Share indices are up 16% and 17% respectively from their October 2023 nadirs.

When companies list, their owners and management want to achieve a valuation they deem appropriate, so it is only to be expected that, as the valuations of listed companies in the UK improve, so does the IPO pipeline.

It is encouraging to hear this confirmed by the LSE though, and if companies are holding off on IPOs while they wait for imminent improvements to regulations, rather than because of any systemic issues with the UK market, then the media’s recent pessimism is surely displaced.   

What’s more, if the FCA’s reforms go far enough in “encouraging a more diverse range of companies to list and grow on UK markets, while promoting more investment opportunities for investors” as they claim to do, we could be on the cusp of a significant increase in UK listings. 

What is now needed is for the FCA to focus its resources on pushing these reforms through so that the IPO pipeline can be converted. The UK broking model relies on IPOs and investment banks have been suffering for a long time now, as evidenced by increasing redundancies and consolidation within the market. With the FCA clearly in a position to deliver the shot in the arm London’s IPO market needs, it should get on and do it.