How have recent UK IPOs been performing?
With 2022 being a slow year for initial public offerings (IPOs) in the UK, we go a little further back in time - 2021 to be precise - to look at how some of the most high-profile listings have performed since their debut.
What is the latest on recent UK IPOs?
“It was a very good year” was a song that Frank Sinatra famously recorded in 1965. But for the UK initial public offering (IPO) market, 2022 was far from that.
IPO activity on the London stock markets fell 90% by proceeds and 62% by number of listings in 2022 when compared to the record highs of 2021. In 2022, just 45 issuers listed, down from a record 119 recorded the previous year. They raised £1.6 billion in total, down from the £16.8 million raised in 2021, according to EY’s market tracker, IPO Eye.
In the final quarter of 2022 (Q4), the main market saw nine IPOs raising £380 million, with the market experiencing minimal activity. The Alternative Investment Market (AIM) also saw limited activity in Q4, with just two IPOs raising £24 million between them.
The UK IPO market slowdown looks set to continue, with the stock market still grappling with macroeconomic headwinds, including geopolitical tensions, and rising inflation and associated interest rate rises.
Scott McCubbin, EY UK and Ireland IPO Leader, said the outlook for 2023 ‘remains uncertain’, with prevailing market conditions ‘likely to lead to depressed IPO activity early in the year’.
‘However, there remains pent-up demand for IPOs, so we may see an upturn in the market in the second half of the year if we avoid further geopolitical shocks,’ he added.
How to buy or trade newly listed UK stocks
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When you invest in a company, you own its underlying shares. As a shareholder, you’d have voting rights and receive dividends (if granted). If you sell your shares when the market price is above the original buy price, you’d make a profit. But if you sell them when the market price is lower than what you bought them at, you’d incur a loss. While potential profits are essentially unlimited, your possible losses on investments are capped at your full initial outlay (excluding any additional fees).
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Five latest high-profile UK IPOs: how have the stocks performed?
There were no listings that raised more than £1 billion on the LSE UK Main Market in 2022. The largest share sale came from Ithaca Energy PLC, which raised £300 million.
Below, we take a look at the five largest listings from 2021 (a year in which listings raised £16.8 billion in total - the highest amount since 2007), and how their share prices are performing as of March 2023.
|Company||IPO date||IPO price||IPO market cap||Share price (as of March 2023)*||Share price movement from IPO to March 2023|
|1. Wise||7/07/2021||800p||£8 billion||540p||-32.5%|
|2. Deliveroo Holdings||31/03/2021||390p||£7.6 billion||94p||-75.9%|
|3. Dr Martens||29/01/2021||370p||£3.7 billion||137p||-69.5%|
|4. Alphawave IP Group||13/05/2021||410p||£3.1 billion||108p||-71.5%|
|5. Darktrace||30/04/2021||250p||£1.7 billion||287p||+14.8%|
*as of 16 March 2023
Wise PLC (LON: WISE)
Shares of UK-headquartered financial technology and money transfer firm, Wise, are down over 30% since its market debut in July 2021.
The largest UK IPO of 2021 saw its share price dwindle in January 2023, after it was accused by a competitor of restricting competition in the money transfer market. Atlantic Money alleged in an official letter to the UK Competition and Markets Authority that Wise unfairly removed its ‘cheaper’ service from the price comparison section of Wise’s website, and also refused to include it on Exiap — a foreign exchange fee comparison site also owned and controlled by Wise.
Despite the decline, Wise remains the most valuable listing by market cap of all companies that went public on the LSE in the last two years.
Three out of four analysts currently have a ‘hold’ rating on the stock, alongside an average price target 583.33p, based on the latest data published by MarketBeat.
Deliveroo Holdings (LON: ROO)
Deliveroo – a food delivery business with operations across the world and its headquarters in the UK – launched its listing at a price of 390p on 31 March 2021 on the LSE. Shares plunged 26% by the end of the first trading day, wiping nearly £2 billion off Deliveroo’s pre-IPO valuation.
Although the food delivery business’ share price is down by nearly 80% - the highest of all the companies on this list, some analysts remain upbeat about the stock.
In early March 2023, Credit Suisse’s equity research team raised its rating on ROO to ‘outperform’ from ‘neutral’, citing the stock’s inexpensive price and its share buyback potential.
Calling it an ‘unrewarded outperformer’, the analysts said the group showcased profit growth potential throughout the 2022 financial year. They added that Deliveroo’s balance sheet also appeared ‘strong’, which could allow the business to defend itself against potential takeover bids via share repurchases.
On the other hand, JPMorgan Chase & Co. analysts lowered their share price target on Deliveroo shares to 91p from 94p, and rating from ‘neutral’ to ‘underweight’.
Dr. Martens PLC (LON: DOCS)
Dr Martens shares have plunged nearly 70% since its hotly anticipated IPO just over two years ago.
The iconic bootmaker’s stock crashed 20% in January 2023, after the company warned that profits will be lower than initially predicted in the current financial year ending 31 March 2023, as a result of ‘significant operational issues’ currently faced by its new distribution centre in Los Angeles, US.
With the business struggling to fulfill wholesale orders and a supply chain bottleneck emerging, underlying profits for the year are now expected to be £15 million to £25 million lower than previously forecast.
However, taking aside this final quarter, total sales rose by 5% year-on-year (YoY) to £755 million during the nine months to 31 December 2022, excluding the impact of exchange rates.
Dr. Martens launched its shares in January 2021 at £3.70 and closed at £4.50 after reaching a high of almost £4.55 on its first trading day, valuing the company at £3.7 billion.
In late 2020, it was reported that the company had sold around 11 million pairs of footwear in over 60 countries in its last fiscal year. Its ‘DOCS’ ticker reflects what the brand’s footwear is popularly and affectionately known as globally.
Alphawave IP Group PLC (LON: AWE)
Alphawave IP Group (recently rebranded as Alphawave Semi) – a semiconductor specialist that develops and licenses data and 5G connectivity technology – went public on 13 May 2021. The company’s valuation at the end of its first trading day was around £3.1 billion.
Since then, the company’s market capitalisation has plunged over 70% to under £750 million.
Alphawave saw licence and non-recurring engineering (NRE) bookings increase 90% YoY in the fourth quarter of 2022. Including estimates of potential future royalties and silicon orders, new bookings excluding the WiseWave multiyear subscription licence were up 272% from the same period a year ago.
For 2023, the company expects to post a revenue of between US$340 million and US$360 million, alongside an adjusted earnings of US$87 million and earnings margin of approximately 25%. Looking even further ahead, Alphawave is targeting an adjusted earnings margin of 30% against earnings of US$150 million by FY2025.
The company’s shares were floated at 410p each on the secondary market, before dropping 20% by the end of the stock’s first trading week. Things then took a positive turn with a bull run that spanned from the beginning of June to early August 2021, eventually reaching an all-time high on 6 August 2021.
Darktrace PLC (LON: DARK)
Darktrace shares are up 15% since its debut on the LSE in April 2021. It is the only company on this list that has bucked the downtrend.
The British-American cybersecurity company, which makes use of artificial intelligence (AI) to identify threats on networks, sold its shares at an IPO price of 250p each, valuing the firm at £1.7 billion at launch.
Even though this was well below the £3 billion market cap that the company was aiming for, Darktrace’s share price then went on a massive bull run, soaring 270% (from its IPO price) to an all-time peak of 946p on 22 October 2021.
In terms of recent financial results, Darktrace delivered ‘continued high revenue growth’ in the first half of FY2023 (up 36% from the same period a year ago).
Operating profit, however, plunged 92% YoY primarily due to elevated share-based payment and associated employer tax charges related to vesting of a significant block of grants made at IPO. The share-based payment charges are expected to normalise in the second half of the year.
Looking ahead, cash flow for the full year is expected to lower to approximately 50% to 55% of adjusted EBITDA due to a net settlement accounting of tax obligations in 1H FY2023.
What are the risks of investing and trading in an IPO?
All trading and investment activity involves risk. IPOs have additional risks, including:
- Not knowing about information that’s critical to a company’s share price, eg ongoing legal cases and intellectual property that isn’t patent protected
- Little to no trading track record to refer to for informed decision making
- Inflated market expectations that don’t materialise
- A company not meeting its target market cap
It’s vital that you have all the relevant information before you take any position. When trading or investing in IPOs, you’ll find useful information in company prospectuses, admission documents and more.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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