London’s Shiny New IPOs Post Lackluster Returns Versus Europe

(Bloomberg) --

London may be hanging on to its status as Europe’s largest listing venue after Brexit, but its newest stocks aren’t as hot for investors as continental initial public offerings.

U.K. IPOs this year have gained 7.3% on average, weighted by offering size, according to data compiled by Bloomberg. That trails the 16% increase for continental listings.

London has been stung by some high-profile flops. Alphawave IP Group Plc has slumped 51% amid concerns over some of its contracts, while Deliveroo Plc has fallen 24%, plagued by concerns about its gig-economy model. Fintech firm Wise Plc has been hit by worries over increased competition, with shares trading 13% below its listing price.

Mainland Europe, meanwhile, has hosted some of 2021’s best post-listing performers, including Swiss drug-ingredient maker PolyPeptide Group AG’s 86% surge and Swedish automaker Volvo Car AB’s 56% rally. 

Post-Brexit supply chain bottlenecks, surging inflation and a shortage of strong-performing growth stocks have left U.K. equities in a rut. The FTSE 100 and midcap FTSE 250 benchmarks have trailed both Europe and the U.S. this year, but even cheap valuations aren’t enough to lure investors.

“The whole Brexit process led to a lingering valuation discount on U.K. domestic companies, many of which then moved more or less straight into the worst of the pandemic,” Andrew Arbuthnott, senior portfolio manager at Amundi SA, said in emailed comments. “London is no longer such an automatic ‘go-to’ location for corporate listings.”

Still, with nearly $22 billion raised this year, London accounts for more than a quarter of Europe’s IPO proceeds and is the region’s top venue. And while rival bourses like Amsterdam now pose a bigger challenge amid post-Brexit trading gains, they haven’t managed to usurp the City when it comes to listings.

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