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Similar to the adage about never being more than six feet away from a rat, a reader of the UK business pages is never more than six clicks away from an article about what ails London’s IPO market.

And fair enough! It’s an important subject! A great many livelihoods depend on figuring out which reforms might reverse the flow of delistings and lift the current funk. But also, it’s a debate that relies more on anatomical metaphors than facts. Each intention-to-float announcement is received either as a shot in the arm or a kick in the teeth.

Blame entrenched politics for this polarised view of the City, as well as on hucksterism, hyperbole and a national impulse for self-depreciation. But also, blame the data. It’s rubbish. 

About a week ago we set out to write a quick post about whether UK companies floating on the local market had performed better or worse than those choosing elsewhere. Separating winners from losers is the kind of task that looks easy via all the main data providers, but isn’t.

The first problem is that once a stock stops trading, it’s memory holed. A takeover is treated no different to a winding up or a suspension awaiting bailiffs: they all disappear into unlisted purgatory.

Even where there’s a price quote still available, is it fair? Does the number on the screen reasonably reflect the per-share value added or subtracted by redomiciles, stock splits, reverse stock splits, paper mergers and myriad other corporate actions that can seem designed to obfuscate? Sometimes yes, sometimes no.

Add in the habit of certain providers (by which we mean big American ones starting with B) to confuse pence with pounds in the IPO database and what’s left is a deeply untrustworthy overview. Anything that can be made quickly from a widely available dataset is probably wrong.

So, we made our own. (CSV format via Pastebin.)

Overall, we found:

  • From issue price, 68 per cent of UK IPOs have lost money.

  • There have been 36 total wipeouts. They had raised £1.54bn in aggregate and all had their primary listings in London.

  • A further 11 stocks have lost more than 99 per cent from IPO price. Between them they raised £2.94bn at IP0, all via primary listings in London.

  • The decade’s best performing UK IPO is probably RockRose Energy, a North Sea oil acquisition vehicle that had a £5mn market cap when joining the LSE’s main market in 2016. It was bought in 2020 by Viaro Energy for £248mn cash.

  • The best performer still trading is probably Cerillion, which makes telecoms billing systems. Anyone backing its 2016 Aim float would be up 1,700 per cent.

An important note: our data only covers companies with a UK (or crown-dependency) domicile, so as well as some big name LSE floats being absent there are quite a few Spacs and tax-dodging oddities. Prices captured are absolute change from IPO value, not total return. Treatment of stuff like all-share mergers is subjective based on whatever the author felt was reasonable. In a few instances, where a final value was elusive, the author gave up.

As well as the disclaimers around data quality, here’s one for aesthetic quality. The charts included in this post are clearly not up to the FT’s award-winning standards of dataviz. We’re sharing them straight from Google Sheets because they’re moderately interesting, not because they’re pretty.

For example, the spreadsheet means we can divide up IPO performance by sponsor. London is so over-broked that the charts barely fit on the page, but because the findings will annoy a lot of people we’re including them anyway.

No great surprises to which banks have been on the most tickets:

[zoom] [zoom]

(Completists may prefer a widescreen version of the bookrunners chart showing all 70 banks.)

Measured by average performance post-IPO, Macquarie is the winner based on its co-ordination role for just two UK floats, RockRose and Virgin Money UK. Though the latter was a dog, the former’s stellar performance gives Macquarie an average return of 1,791 per cent.

For legibility reasons Macquarie is excluded from the global coordinator performance chart . . . 

, . . . whereas the one showing average performance of bookrunners cuts off any bank with fewer than seven IPOs to its name. There’s a widescreen version for download here.

[zoom] [zoom]

As well as ranking post-IPO performance by simple averages, we can measure by cash raised. On that basis:

  • Four LSE floats have destroyed more than £1bn of investor capital. They are THG (£1.65bn), AA (£1.2bn), Deliveroo and Aston Martin Lagonda (both £1.1bn)

  • The best performer on the same measure is probably New York-listed IHS Markit, though being on the minority side of all-share takeovers in 2016 and 2020 make calculations tricky. We estimate capital accretion, relative to an £875mn equivalent offer size on its 2014 IPO, of nearly £3.5bn.

  • Three other floats, all on the LSE, have added more than £1bn in shareholder value: Auto Trader (£2.7bn), Worldpay (£2.5bn, albeit partly in FIS paper) and B&M (£1bn)

Here’s how the returns divide up by global coordinator:

[zoom]

BofA leads because it was on the ticket for Auto Trader, Worldpay and B&M. JPMorgan and Goldman Sachs are bottom of the pile because they helped lead the THG, Deliveroo and Aston Martin syndicates. Cenkos is among the laggards because its only co-ordination gig was for AA.

The above broker charts mostly ignore Aim, London’s junior market, where the IPO system involves Nominated Advisors rather than syndicates. Down there, Cenkos has been busiest on deal count whereas Investec and Zeus have raised the most cash:

Investec and Zeus Shore* have been Nomad to the best post-IPO performers, on average.

* In an earlier version of the post we wrote Zeus rather than Shore here; apologies to both.

That banks floating early-stage companies have a worse average performance than those further up the chain shouldn’t be wholly surprising. Excluding one-trick ponies the worst performers have tended to float via Northland (-88 per cent on average across five microcap deals) and Peel Hunt (-52 per cent on average from 10 IPOs).

[zoom] [zoom]

Is there a point to all this number crunching? Not really. Venue advantages can’t be clearly isolated by data alone.

It might be handy to know that a majority of UK floats lose money relative to the placing price, irrespective of whether they’re listed in London or New York. Any broader conclusion has to hang more on distortions than correlations, because London as a capital-raising venue has unquantifiable strengths and drawbacks depending on individual circumstances — just as all those articles mentioned the intro have already debated at length.

So perhaps the only useful thing to take away is this: next time a UK float runs into trouble, it’s probably best viewed as a vote of confidence on the company rather than on its host market.

Further reading:
WE Soda’s coming to London. Why? (FTAV)
The City needs an intervention (FTAV)
Diagnosing London’s listing miasma (FTAV)
A farewell to Arm (FTAV)
The IPO outlook in one word (FTAV)

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