Did Brexit Kill the British IPO Market?by and
U.K. listings are at less than half their year-ago volume
European firms have postponed $5.7 billion in IPOs since vote
Companies attempting to go public in the U.K. post Brexit face an uphill battle.
Financial-software maker Misys canceled its planned initial public offering in a statement Thursday and the chief executive officer of Telefonica SA’s O2 said Wednesday the company is postponing a potential listing of the U.K. mobile-phone unit until at least next year.
Investor uncertainty hurt IPO volumes in the lead-up to the June vote, and concerns about how the British economy would perform outside of the European Union depressed listings afterward. IPOs in London have raised about $6.8 billion so far this year, less than half of what they sold in the same period last year, data compiled by Bloomberg show.
“Like any shock to the market, Brexit is another form of volatility,” said Mark Hughes, U.K. capital markets partner at PricewaterhouseCoopers LLP. “The difference with Brexit is that the crucial decisions won’t happen until next year.”
Eleven European companies withdrew or postponed listings amounting to $5.7 billion since the June 23 referendum amid uncertainty over Brexit and the outcome of the U.S. elections in November, according to the data. Germany’s IVG Immobilien AG’s OfficeFirst unit and the U.K.’s Pure Gym Group Plc shelved IPO plans this month, both citing challenging conditions. Telefonica pulled an IPO of its Spanish infrastructure business last month.
O2 CEO Mark Evans told journalists Wednesday that unstable market conditions brought on by Brexit had led the company to put off a potential listing until at least next year.
“Despite encouraging institutional support, Misys Group Limited has decided not to proceed with its potential initial public offering at the current time due to market conditions,” the company, which is owned by buyout firm Vista Equity Partners, said in a statement Thursday.
Investors are becoming cautious about deals in which private equity firms are sellers because they often load companies with debt when they buy in and then use cash on the balance sheet to pay that off instead of making capital investments, said Richard Penny, senior fund manager at Legal & General Group Plc.
‘Lack of Conviction’
Investors are also being more selective about which IPOs they participate in as they wait to see how Brexit will affect markets, said Gareth McCartney, head of equity syndicate at UBS Group AG. In spite of relatively strong market conditions and easy access to cash, “a general lack of conviction” is responsible for the muted response to IPOs, he said.
Still, some deals are getting done. Medical products company ConvaTec Group Plc rose 1.6 percent at 3:58 p.m. in London Thursday, its second day of trading after raising 1.47 billion pounds ($1.79 billion) in the largest U.K. IPO this year.