The value of flotations in the UK has reached $7.16bn (£4.46bn), that’s a whopping eight times the amount raised by this time last year, according to Dealogic. There’s plenty more to come, with the government’s £1.2bn Royal Mail float fast approaching.
We should probably mention we’re still a tad behind the 2006 peak of $24bn though.
Companies are feeling more confident they can raise funds by going public: successful IPOs from Countrywide, Crest Nicholson and most recently, Foxtons, have cemented this.
Research by private equity firm ECI has found 41% of high-growth companies would consider selling shares – this figure was only 9% last year. Of the 650 companies surveyed, 54% said they expected it to be easy, or very easy, to obtain growth finance over the next 12 months (up from 36% in 2012).
Joining UK investors in their thirst for shares are swathes of US financiers. According to the figures, US funds are keen to rebuild their links to European companies, buying up shares now the eurozone crisis has abated somewhat.
‘Typically US investors now account for 30-40% of investors in UK IPOs, and they too have plenty of cash,’ said Adam Young, head of global equity capital markets advisory at Rothschild.
‘The value the stock market can deliver to sellers is competitive with mergers and acquisitions…The current season feels good.’
The motivations behind some of the most recent IPOs have been quite interesting. Foxtons, whose share price rose sharply from 230p to 267p on Friday, its first day of trading, planned its IPO to pay off outstanding debts. Meanwhile, W&G Investments (a consortium of City funds) floated on AIM simply to raise the money to take over 316 RBS branches – now reports have suggested its bid has been rejected. Ouch.
A note of optimism crept into Royal Mail's impending flotation this weekend though, when a little known US rating agency, Rapid Ratings, claimed it was financially the healthiest of the world’s parcel companies. It’s presumably music to George Osborne’s ears, as he plans to top up the Treasury’s coffers by selling off shares in the 500-year-old British postal company.
Another flotation to watch out for is Merlin Entertainments, the world’s second biggest theme park owner, which hopes to raise some £3.5bn in its IPO.
But before you throw caution to the wind and start planning your corporate roadshow, analysts are clear uncertainty remains in the markets. ‘While a recovery is well and truly under way, it is still in its early phases,’ said David Ewing, managing partner of ECI.