London IPOs Begin Life After Brexit With Best Start Since 2008

(Bloomberg) -- The London IPO scene hasn’t had it this good in well over a decade.

On Tuesday, virtual greeting cards platform Moonpig Group Plc became the latest company to unveil plans to list its shares on the London Stock Exchange. It joined iconic bootmaker Dr. Martens this week to kick off the city’s best start to a year for initial public offerings since the financial crisis in 2008.

Bolstered by the roaring rebound in 2021 for U.K. stock markets -- with the FTSE 100 Index bouncing out of its worst annual drop in more than a decade with its best first three days on record -- companies are lining up to list shares in London. The lifting of the cloud over the Brexit deal and hopes for an economic revival following the U.K.’s super-charged Covid-19 vaccination drive are spurring a long-awaited renaissance of home-grown IPOs.

“Brexit has improved listing sentiment for domestic issuers as it is a material uncertainty out of the way, finally, and people can see a way through the coronavirus crisis now -- albeit with differing views on when it will end,” said Erik Anderson, head of corporate broking at investment bank Panmure Gordon.

The new wave of listings reverses a cooling of the trend since Britain’s vote to leave the European Union in 2016, with London registering a marked decline in money raised through new floats.

Besides the five IPOs already underway, there are several waiting in the wings. U.K. food-delivery startup Deliveroo and cybersecurity firm Darktrace Ltd. are prepping offerings, Bloomberg reported last year. And EQT-owned veterinary group IVC Evidensia, online reviews platform Trustpilot and Eight Fifty Food Group have all picked banks to advise on listing plans, Sky News reported.

Luring these companies are the gains made by some recently listed companies. Moonpig and Dr. Martens are keen to follow in the footsteps of fellow e-commerce company THG Holdings Plc, which listed on London’s standard segment in a $2.4 billion offering in September. Its shares have surged 61% since.

Unlike THG, both these IPO candidates are looking for a premium listing in London, pledging to make at least 25% of their share capital available for trading. Both said they expect to be eligible for FTSE benchmarks after their debuts.

Granted, how sustainable this nascent IPO trend is will depend on how far the stock market rally goes, the results of the negotiations between the U.K. and the EU on financial regulations and the twists and turns of the pandemic. But for now, companies are riding the wave.

“Investors do need to be on their guard in case the steady flow of new deals becomes a flood, especially if deal quality starts to flag and certain hot or popular sectors witness very high levels of activity,” Russ Mould, investment director at AJ Bell, said in a note.

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