London stock market floats will pick up in the second quarter after a lull at the start of the year, according to analysis from big four accountant EY.
The volume of initial public offerings (IPOs) surged over the course of 2017, with flotations raising well over double the amount collected in the previous year, EY said.
Scott McCubbin, EY’s IPO leader, said: “We expect the first quarter of 2018 to be relatively quiet on UK exchanges, but IPO activity will pick up considerably in the second quarter as the low value of the pound continues to make UK investments attractive to international investors.”
The fourth quarter of 2017 saw a surge in fundraising, with more than £5bn raised, compared to £2.4bn during the same period in 2016, EY’s analysis shows. The UK market hit 100 floats in 2017 for the first time in three years, according to London Stock Exchange data.
UK IPO activity could also benefit from a number of upcoming rule changes from City regulators at the Financial Conduct Authority (FCA), with relaxations on reverse takeover rules and concessions for certain property companies having come into effect at the start of the year.
“Cross-border issuers will also be looking to take advantage of regulatory stability ahead of the return of market uncertainty in 2019,” McCubbin said, referring to the expected lull for floats around Brexit in March 2019.
Meanwhile, the destination for the expected mega-float of part of Saudi Aramco, the titanic state-owned oil producer, remains to be decided.
Investors have shown some signs of reticence to subscribe to some IPOs in recent months. Most notably, network infrastructure firm Arqiva and food producer Bakkavor pulled floats in the face of pricing pressure in November.
McCubbin said: “The lack of well-known brand names or a strong pipeline of private equity-backed IPOs is keeping pricing at a lower level, leading to a continued number of postponed or withdrawn listings.”