Publication featured in: City AM
IPOs in London raised less than £1.6bn in the past year, a fall of 72% from the £5.7bn raised in the previous 12 months (year end June 30).
There were only 30 IPOs on the London Stock Exchange in the last year, down 78% from the 137 floats the market saw in 2021/22.
The amount of new money raised in IPOs on the main market fell 67% from £4.5bn to £1.5bn in the last 12 months, while the number of IPOs fell 75% from 79 to 20.
Rising interest rates and lack of investor demand for IPOs have led to many companies shelving plans to float.
The last 12 months have hit the London market hard. Investor appetite for has receded considerably as interest rates have risen which has impacted valuations. A number of IPOs have been put on the back burner as a result.
With how volatile equity markets have been in recent months, a lot of companies that see an IPO as their next stage to fund growth have decided to hold tight.
AIM hit harder than main market by rising economic stress
AIM has been hit harder than the main market by the economic stress that has affected the UK over the past year. Funds raised in IPOs on AIM have fallen to their lowest level on record, with just £68m raised in the last 12 months.
There were only 10 IPOs on AIM in the last year, the lowest since the nine companies that floated in 2008/9 and the peak of the last financial crisis. However those nine floats raised £429m in new equity, more than six times the amount raised this year (see graph below).
The quiet IPO market of the last year comes on the back of a positive 2021/22 for AIM, in which 58 IPOs raised more than £1.2bn. 2022/23 represents a 94% fall in money raised and an 83% fall in the number of IPOs.
The AIM All-Share Index has also underperformed the main market, falling 14% in the 12 months to the end of June 2023, compared to a 4% rise for the FTSE All-Share Index over the same period.
While interest rate increases may now be near an end, AIM companies are still at risk from a recession causing growth to stall and volatile share prices. Smaller companies on AIM rely on a healthy economy and lower borrowing costs to thrive.
While the AIM IPO market is similar to that of the last financial crisis, AIM is now performing much better than it did in 2008/9 in terms of the number of companies leaving the market.
In the last 12 months 50 companies left AIM, meaning that the market has shrunk by a net 40 companies. In the same period in 2008/9, 275 companies left the market, shrinking it by a net 266 companies.
AIM is a very different market than it was 15 years ago. The last financial crisis saw swathes of companies on AIM leave as they went insolvent or were picked up in cut-price M&A deals. This year there has been nothing of the kind – AIM companies have for the most part weathered the economic storm well.
Compared to 15 years ago, AIM is much better-diversified in terms of sectors and home to a far higher quality of companies.
Amount of money raised in AIM IPOs – last 15 years