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Surprise General Election result gives a boost to IPO market

It was widely expected that IPO activity in the second quarter of this year would slow down as a result of the General Election and, while the overall level of IPOs was some way off the performance seen at the same point in 2014, the surprise result of a majority government gave a boost to the quarter’s second half IPO activity.

The main market saw 9 IPOs this quarter raising £3bn, with over half the deals originating from overseas issuers. The Alternative Investment Market (AIM) celebrated its 20th anniversary this quarter and recovered well from its quiet opening to the year, producing 13 IPOs and raising £351m of funds.

Global IPO activity maintained the steady pace set during the first three months of the year producing 631 IPOs in H1, a 6% increase on the same period last year. The US has produced 101 IPOs so far this year with healthcare being the dominant performer accounting for 40% of all IPOs. Asia-Pacific is the standout region so far in 2015 producing 355 IPOs in H1, up 66% on the same period last year. China has also had a strong quarter with deal volume up by 132% on Q1. EMEIA has had a more subdued first half of the year compared to 2014 which can be attributed in part to the growing uncertainty surrounding Greece.

Main market — 9 floats raised £3bn in Q2, a very good result considering the General Election took place this quarter.

AIM — 13 AIM admissions raised £351mn, an increase on the 6 admissions that took place in the opening quarter.

IPO EyeAn overview of Q2 2015

2 | IPO Eye An overview of Q2 2015

New Issues — Main market

Date of admission Company PE backed Country of incorporation

Region/s of domicile

Sector Market cap. on admission (£mn)

Funds raised (£mn)

Placing price (p)

Closing price (after first day of trading)

Closing price (at QTR end)

% change in price

01–Apr–15 Sanne Group Plc Y Jersey Global Asset Management 232 142 200 224 267 33%

02–Apr–15 BCA Marketplace Plc Y England UK and Europe Motoring 1,170 1,200 150 157 158 5%

08–Apr–15 Shawbrook Group Plc Y UK UK Banking 725 90 290 306 366 26%

05–May–15 Permanent TSB Group Holdings Plc N Ireland Ireland Banking 1,400 357 450 468 465 3%

06–May–15 Integrated Diagnostics Holdings Plc Y Jersey Middle East Heathcare 431 219 445 560 585 31%

10–Jun–15 Cairn Homes Plc N Ireland Ireland Housing 313 323 100 105 109 9%

19–Jun–15 PureTech Health Plc N UK USA Healthcare 364 108 160 178 173 8%

26–Jun–15 Sophos Group Plc Y UK Global Software 1,013 352 225 241 234 4%

New Issues — AIM




Funds raised (£mn)

Placing price (p)



% change in price

02–Apr–15 Motif Bio Plc Y England USA Biotechnology 13 3 20 30 69 244%

02–Apr–15 Marshall Motor Holdings Plc N England UK Motoring 115 40 149 162 181 21%

07–May–15 Verseon Corp N USA USA Biotechnology 296 64 202 215 220 9%

07–May–15 MayAir Group Plc N Jersey South East Asia Industrial engineering 55 16 130 132 135 4%

07–May–15 Curtis Banks Group Ltd N England UK Financial Services 85 8 190 207 224 18%

12–May–15 Satellite Solutions Worldwide Group N England Europe Telecommunications 14 2 5 5 5 4%

19–May–15 Stride Gaming Plc N Jersey UK Online gambling 66 11 132 172 203 53%

26–May–15 Elegant Hotels Group Plc Y England Barbados Hotels 89 63 100 102 111 11%

03–Jun–15 Gear4music (Holdings) Plc Y UK UK Retail 28 10 139 143 140 0%

04–Jun–15 Fishing Republic Plc N England UK Retail 4 2 15 17 17 12%

08–Jun–15 Gateley (Holdings) Plc N England UK Legal 100 30 95 99 101 6%

03–Jun–15 Adgorithms Ltd N Israel Global Digital Media 82 27 133 139 131 -2%

19–Jun–15 Applegreen plc N Ireland Ireland Petrol stations 219 75 277 300 309 11%

De-merger — Main market




Funds raised (£mn)

Placing price (p)



% change in price

16–May–15 South32 Ltd N Australia Global Mining 8,400 N/A 105 108 86 -18%

What constitutes an IPO? ► Not all new admissions, as listed by the London Stock Exchange, are defined as IPOs for the purposes of the commentary throughout

this report. Our definition excludes secondaries, re-admissions, investment funds, transfers from AIM to Main (and vice-versa) and introductions where no money is being raised, or shares placed with new investors.

Market listings

3IPO Eye An overview of Q2 2015 |

New Issues — Main market




Funds raised (£mn)

Placing price (p)



% change in price

01–Apr–15 Sanne Group Plc Y Jersey Global Asset Management 232 142 200 224 267 33%

02–Apr–15 BCA Marketplace Plc Y England UK and Europe Motoring 1,170 1,200 150 157 158 5%

08–Apr–15 Shawbrook Group Plc Y UK UK Banking 725 90 290 306 366 26%

05–May–15 Permanent TSB Group Holdings Plc N Ireland Ireland Banking 1,400 357 450 468 465 3%

06–May–15 Integrated Diagnostics Holdings Plc Y Jersey Middle East Heathcare 431 219 445 560 585 31%

10–Jun–15 Cairn Homes Plc N Ireland Ireland Housing 313 323 100 105 109 9%

19–Jun–15 PureTech Health Plc N UK USA Healthcare 364 108 160 178 173 8%

26–Jun–15 Sophos Group Plc Y UK Global Software 1,013 352 225 241 234 4%

New Issues — AIM




Funds raised (£mn)

Placing price (p)



% change in price

02–Apr–15 Motif Bio Plc Y England USA Biotechnology 13 3 20 30 69 244%

02–Apr–15 Marshall Motor Holdings Plc N England UK Motoring 115 40 149 162 181 21%

07–May–15 Verseon Corp N USA USA Biotechnology 296 64 202 215 220 9%

07–May–15 MayAir Group Plc N Jersey South East Asia Industrial engineering 55 16 130 132 135 4%

07–May–15 Curtis Banks Group Ltd N England UK Financial Services 85 8 190 207 224 18%

12–May–15 Satellite Solutions Worldwide Group N England Europe Telecommunications 14 2 5 5 5 4%

19–May–15 Stride Gaming Plc N Jersey UK Online gambling 66 11 132 172 203 53%

26–May–15 Elegant Hotels Group Plc Y England Barbados Hotels 89 63 100 102 111 11%

03–Jun–15 Gear4music (Holdings) Plc Y UK UK Retail 28 10 139 143 140 0%

04–Jun–15 Fishing Republic Plc N England UK Retail 4 2 15 17 17 12%

08–Jun–15 Gateley (Holdings) Plc N England UK Legal 100 30 95 99 101 6%

03–Jun–15 Adgorithms Ltd N Israel Global Digital Media 82 27 133 139 131 -2%

19–Jun–15 Applegreen plc N Ireland Ireland Petrol stations 219 75 277 300 309 11%

De-merger — Main market




Funds raised (£mn)

Placing price (p)



% change in price

16–May–15 South32 Ltd N Australia Global Mining 8,400 N/A 105 108 86 -18%

5 4

2

8

3

7

21

21

0

45

21

11

8

19

5

3

109

0

2

4

6

8

10

12

14

16

18

20

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

No.

of

IPO

s

Fund

rai

se £

m

Fund raise £m No. of IPOs

2010 2011 2012 2013 2014 2015


The General Election and widely tipped prospect of a hung parliament slowed IPO activity at the beginning of this quarter. The unexpected result, however, helped boost investor and issuer confidence and stimulated IPO activity in the second half of Q2.

The quarter produced 22 IPOs raising cumulative funds of £3.4bn which is a strong outcome given the market backdrop.

Main marketWe saw 9 main market IPOs this quarter, with over half originating from overseas issuers. Once again private equity backed businesses made up a significant proportion (two thirds) of the listings.

The quarter saw another challenger bank, Shawbrook, come to market. The bank which is backed by private equity firm Pollen

In this quarter

Street Capital, markets loans to SME type businesses who are finding it difficult to get finance from the major high street banks. The bank managed to raise £90mn at a valuation of £725mn and the stock has since performed well, and is currently trading at 26% above initial offering price.

What was particularly encouraging this quarter was the level of inbound IPOs, with over half of the deals originating from overseas. These stocks are all trading at a healthy average of 20% above initial offer price which should further enhance London’s reputation as an attractive destination for international issuers. Particularly strong performers were the Egyptian businesses Integrated Diagnostics (healthcare) and Edita Food Industries (food manufacturing), which are trading at premia of 31% and 51% above their initial offer price respectively.

London had its biggest ever tech IPO this quarter. Oxfordshire based IT security business Sophos floated on 26 June at a valuation of over £1bn.

IPO Main market: historical performance

Fund raise £m No. of IPOs

67

8

20

2

13

15

65

118

8

5

11

16

19

16

18

14

19

6

13

0

5

10

15

20

25

0

200

400

600

800

1,000

1,200

1,400

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

No.

of

IPO

s

Fund

rai

se £

m

2010 2011 2012 2013 2014 2015


The group successfully raised £352mn and the listing will be viewed as a real coup by the LSE given that similar past floats have favoured NASDAQ over London. The funds raised will be used to pay down net debt and to help with the group’s expansion into foreign markets.

AIM

AIM rebounded well from its quiet start to the year producing 13 IPOs raising £351m, over twice that produced in the opening quarter.

As is typical of AIM the admissions covered a cross-spectrum of industry ranging from biotechnology to retail.

This quarter saw two biotechnology admissions originate from the US, Motif Bio and Verseon. Motif Bio was trading at a staggering 244% above offer price at the time of going to press whereas Verseon has been more sedate trading at a 9% premium.

Car dealership Marshall Motors floated this quarter raising £40mn at a market capitalisation of £115mn. The circumstances

surrounding the deal are quite unique in that a formal intention to float was not published, but rather the issuer and advisors approached individual investors privately, in what is known as a ‘stealth’ float. They can be beneficial in that they can provide a speedier process in coming to market and they can also avoid the investor scrutiny that comes with a public offering. However because there is often less publicity to attract investors this can often result in a lower float price.

The Irish petrol station group Applegreen floated in June raising £75mn at a market valuation of £219mn. It was the second Irish business to float in London this quarter and it is also the largest fundraise to have taken place on AIM so far in 2015. The company has 150 sites across the UK and Ireland with two more in the US. The funds raised will be used to acquire new sites in the markets in which it operates and also to develop existing sites.

Aftermarket performanceAt quarter end, main market IPOs were trading at an impressive average of 19% above offering price and AIM admissions are trading at an average premium of 30%. The average for AIM admissions lowers significantly to 12% when Motif Bio is removed from the data.

IPO AIM market: historical performance

85

90

95

100

2 Ja

nuar

y 20

15

9 Ja

nuar

y 20

15

16 J

anua

ry 2

015

23 J

anua

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30 J

anua

ry 2

015

6 Fe

brua

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015

13 F

ebru

ary

2015

20 F

ebru

ary

2015

27 F

ebru

ary

2015

6 M

arch

201

5

13 M

arch

201

5

20 M

arch

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27 M

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3 A

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2015

10 A

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17 A

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2015

24 A

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1 M

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8 M

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15 M

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22 M

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29 M

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5 Ju

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12 J

une

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19 J

une

2015

26 J

une

2015

105

110

115

120

FTSE 100 FTSE 250 FTSE All-Share FTSE AIM All-Share


FTSE Indices — 2015

Source: S&P Capital IQ

Overall the IPO market has performed strongly in the aftermarket this quarter with all but one IPO trading in positive territory.

The strong post issue trading performances perhaps reflect a cautious approach to pricing given the uncertainty which prevailed during most of the quarter. The impending general election and the events in Greece over the past few weeks have undoubtedly had an impact on the market but nevertheless quality assets, sensibly priced have found demand.

VolatilityThe FTSE indices have been on an upward track for the majority of the quarter with most peaking around the late May, early June period. However the recent events in the Eurozone have had an impact causing all indices to drop considerably. As of 30 June, all FTSE indices remain above their level of a year ago except for the FTSE 100 which is trading just under it’s opening position.

In this quarter


The decisive general election result was welcomed by the wider market and has provided a heightened level of optimism for potential IPO activity in the second half of the year. Many businesses have kick started plans to come to market in Q4 and IPO pipelines are currently full. However, at the time of going to press the Greek referendum had just returned a no vote in relation to the proposed EU bailout conditions which could potentially see in another period of uncertainty whilst Greece’s future is determined.

It would appear though that this issue will not be resolved quickly. Whilst both investors and issuers are likely to be more sensitive to market risk, at the present time we do not detect any signs of the market closing.

As previously discussed it was very encouraging to see an increasing number of international IPOs this quarter and we hope this will spur on other overseas businesses to join the London market. At present we are seeing a healthy number of businesses

from abroad starting to consider coming to the London. The positive post-trading performances that we have seen from those IPOs this quarter should provide greater inducement to overseas businesses.

Overall we feel that the London market will remain open in the medium term. Private Equity still remains a good driver of market activity and we expect this to be further supplemented by an increasing level of inbound deals. Q3 will undoubtedly be quieter given the ensuing summer holidays but we expect Q4 to provide a good level of activity for what has been a good year to date. Indeed, one of the risks for potential Q4 issuers may be the sheer volume of IPOs looking to come to market.

Looking forward


For more information contact our international specialists or alternatively speak to your local EY adviser.

David VaughanIPO Leader

Tel: + 44 20 7951 3107Email: [email protected]

Scott McCubbinPartner, UK London


Richard HardingPartner, UK North


Lesley Roberts Partner, Financial Position and Prospects


Dom McAraExecutive Director, UK Midlands


Richard HallPartner, UK London


David WilkinsonPartner, UK South


Nadeem KhanDirector, India


Steve CollinsDirector, Americas


Timothy PinkstoneDirector, Russia and CIS


Marcus BaileyExecutive Director, Middle East and Africa


Ian KellyDirector, Ireland


Cary WilsonPartner, Ireland


Please visit www.ey.com/uk/IPO for more information on how we can help you or your business.

IPO specialist team


EY Global IPO Center of ExcellenceOur Global IPO Center of Excellence is a virtual hub which provides access to tools and knowledge for every step of the journey from finding out more about what going public means to considering capital raising options and addressing post-IPO risks. It provides access to all our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source.

www.ey.com/ipocenter

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Notes

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