Subdued H1 2023 for London stock market as IPO activity continues to face challenges

• H1 2023 IPO activity on the UK main market and AIM saw a 31% drop in deal numbers compared to H1 2022, although proceeds raised were in line with H1 2022

• Global IPO activity proceeds fell 36% year-on-year in H1 2023

• Geopolitical and macroeconomic headwinds are expected to continue in H2 however, a healthy pipeline of IPOs means the long-term outlook is more positive

The London stock market witnessed a subdued first half to 2023 with 18 issuers raising £593m as IPO performance continued to be adversely impacted by high inflation, rising interest rates and geopolitical pressures.

Whilst proceeds were in line with H1 2022 when £594m was raised from 26 issuers, the figure is well below the record levels of activity experienced in H1 2021 when 47 IPOs in London raised £9.4bn.

In the second quarter of 2023, the UK main market listed 10 IPOs which raised £497m in total, whilst the Alternative Investment Market (AIM) saw three admissions during the quarter raising £15.5m. The largest main market IPO in the period was Admiral Acquisition Ltd which raised £439.8m and the largest AIM admission was Fadel Partners Inc, which raised £7.6m

Scott McCubbin, EY UKI IPO Leader, comments: “The London IPO market continues to experience challenges with macroeconomic and geopolitical pressures having an adverse impact on businesses looking to list in the UK. These headwinds will need to abate to enable real growth, however with some larger IPOs expected in 2024 and a strong pipeline, the long-term outlook looks more positive.

“The upcoming reviews by the FCA and Treasury may also provide some impetus to the UK markets and help boost the UK’s appeal as a global listing destination, however it’s vital that a robust package of measures is implemented to tackle the fundamental issues affecting London’s capital markets. 

“The FCA’s proposals to simplify the UK listings regime should have a positive impact if coordinated with wider reforms, however the proposals will also remove some key, post-listing, investor protections for which the London stock market is well-known for. This increase in investor risk could reduce the appeal of the UK market to investors so it’s imperative a balanced approach is considered to make London a more attractive destination to list.”

Global IPO activity continued to contract

The Global IPO markets recorded 615 IPOs in H1, raising $60.9bn, a 5% and 36% decrease compared with the same period in 2022. Whilst several larger deals came to the market in Q2, the recovery has been hindered by slower economic growth, tight monetary policies and heightened geopolitical tensions. 

Asia-Pacific maintained its position as the global leader in IPO volume and value, accounting for 60% of all IPOs. The Americas region saw an 86% increase in proceeds however, this was primarily due to one single mega spin-off IPO, which was the largest US IPO since November 2021. 

Despite a global decline in technology IPOs in H1 2023, the sector still had the largest number of IPOs, whilst proceeds raised by companies within the energy sector fell due to softer global energy prices. 

Debbie O’Hanlon, EY UKI Private Leader, said: “The global IPO market continues to be challenged by economic headwinds, however we have seen some green shoots of recovery in IPO activities in Q2, particularly in the Asia-Pacific and Americas markets. 

“Whilst there are signs of a rebound, companies will need to continue to consider the impact of geopolitical risk, macroeconomic factors and the changing regulatory environment when considering an IPO, as well as being flexible about valuations, given recent post-IPO share price performance and rising interest rates.”