The most important driver of IPO activity is past stock market performance, admitted Liberum. Some sectors, such as retail / consumer, are going through a difficult time, but others (eg energy) will take over.

It has been a banner year for Initial Public Offerings (IPOs) and stock broker Liberum believes there is much more to come.

The number of IPOs in the first nine months of this year has broken all records, both here in the UK, the US and the Eurozone, but some wonder how long the good times can continue.

Don’t be afraid, said Liberum.

“Growing investor fears over high energy prices and slower growth have prompted questions about the sustainability of the IPO boom we’ve seen so far,” the broker said before saying that his analysis shows that there is no weariness of IPOs. and that the primary driver of new listing activity is past stock market performance.

Of course, the rate of new admissions to the market is expected to decline in the fourth quarter of this year, Liberum predicts, but only to levels seen in 2018/19, both of which were good years for IPOs.

For the United States, Liberum predicts a total IPO volume of US $ 93.2 billion in 2021; for the euro zone 31.6 billion euros and for the United Kingdom 14.7 billion pounds sterling. These are all the highest levels on record since Liberum started keeping records in 2005.

Not only has the number of IPOs increased, but the size of newly listed companies has grown year on year, Liberum noted.

Of course, part of that windfall is the result of the delay in IPOs that were due to take place in 2020 due to the pandemic. On top of that, some new planned listings, such as that of the controversial brewery BrewDog, were recently withdrawn due to market volatility.

Liberum pulled a stack of numbers from its IPO database and concluded that in all three markets (US, UK and Eurozone), the volume of past IPOs has very little impact on demand and market performance. success of future IPOs, even in times of strong issuance activity.

Stock market volatility has some influence, the broker acknowledged, but the most important driver of IPO activity is past stock returns, Liberum acknowledged.

“And with this disproportionate influence of past returns on IPO volume, there is good news and bad news. The good news is that despite all the investor fears that we saw rising in October, the 12-month yield of the FTSE All-Share is still 26.6% (30.8% including dividends) and the yield of the Stoxx. Europe excluding UK is 33.2% (36.6% including dividends). That alone should keep IPO volumes at reasonably high levels in the fourth quarter of 2021 and early 2022, ”the Liberum note said.

“The bad news is that the environment in some areas has deteriorated dramatically. After the last two months IPOs in the retail or consumer sectors in general will likely be postponed until a better pricing environment is available. Meanwhile, IPOs in the energy, renewable energy and finance sectors face a much better environment than just three months ago, ”he said.

Swings and roundabouts, in other words.

“As is so often the case, the talk about the death of the IPO market is vastly exaggerated. While the fourth quarter will see fewer IPOs and lower volume, we are essentially reverting to 2018/2019 levels which were still healthy years for new issues and debuts on the stock exchange, ”concluded Liberum.


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