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The FTSE 100 has hit a record high, fuelling share sales on the UK stock market, although the number of new listings in London remains sluggish.
The volume of follow-on deals, in which investors in listed companies sell significant portions of their shares, has already reached $11.5 billion this year, according to data from London Stock Exchange Group Inc. That’s the fastest start to the year since the boom years of 2021, with 110 such follow-on issuances through late May.
According to LSEG data, only four London IPOs have raised about $148 million so far this year, all of which have been small deals.
Other European exchanges have seen bigger IPOs this year, but London remains the region’s most active exchange when secondary trading is included.
“London has far outperformed other markets in terms of issuance volume so far this year, but it is yet to complete a single major IPO,” said Andreas Bernstorff, head of equity capital markets for Europe, Middle East and Africa at BNP Paribas.
The appetite for financing has been boosted by subsiding domestic inflation, growing global growth and a surge in the FTSE 100 index to a record high as investors bet higher commodity prices will boost earnings at resource-related companies. The index has risen 7.6% over the past three months, outperforming the S&P 500, Nasdaq Composite and Stoxx Europe 600 over the same period.
The London stock market has raised a total of $11.6 billion this year, while the French and German stock exchanges have both raised less than $5 billion, and the Amsterdam stock market has raised just $2.5 billion.
These totals still fall far short of those in the United States, where the New York Stock Exchange and Nasdaq each generate more than $34 billion in revenue.
Many companies and investors, including shareholders in LSEG itself, have been looking to generate cash from positions that are no longer core to their strategies.
A consortium of investors has been gradually selling billions of pounds worth of shares in LSEG that it acquired in 2021 when the stock exchange bought data and trading group Refinitiv for $27 billion.
In the most recent deal in mid-May, investors including private equity group Blackstone sold a bundled stake worth about 3% of the company for nearly $2 billion. The deal offered shares at 1.1% above market price, a rare example of a bundled deal being offered at a premium rather than a discount. Other large bundled deals include GSK and Pfizer’s sale of shares in consumer health group Haelion.
“Given the strong buying by investors into high-quality assets and the strong performance of blocks last year, this presents a unique opportunity for a large strategic block that has been held for many years to be unlocked,” said Aloke Gupte, co-head of international equity capital markets at JPMorgan.
This year’s total share offerings in London do not include National Grid’s plan to raise 7 billion pounds to strengthen electricity grids in the United States and Britain.
London’s robust performance contrasts with a market that has struggled to attract IPOs. Small-computer maker Raspberry Pi is expected to list next month, though it is expected to raise a small amount.
Bigger multi-billion-dollar deals have taken place elsewhere in Europe, including skin care specialist Galderma’s Swiss listing and private equity group CVC’s Amsterdam IPO.
The recovery comes after a rush of IPOs during the pandemic when low interest rates prompted a surge in activity. Some of those listings, including British food delivery group Deliveroo and boot maker Dr. Martens, have since disappointing.
“European IPO recovery is in the early stages. The UK has yet to see a recovery, but it’s simply a matter of time and memories of the terrible events of 2021 fading,” Bernstorff said.
