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On average IPOs have performed well this year, but 2021 has also seen its fair share of flops
Thursday 16 Dec 2021 Author: Martin Gamble

It has been a busy year for IPOs (initial public offerings) in the UK with over 110 companies coming to the stock market, raising over £14 billion according to the London Stock Exchange, far outstripping the £9.3 billion raised last year.

This follows similar trends seen in international markets, making 2021 the busiest year of IPO activity in over 20 years according to consultant EY.

London maintained its ranking as the biggest venue for IPOs across Europe by value of funds raised with eight international companies choosing London to list shares.

RARE UK TECH LISTING

The Main Market saw the biggest ever direct listing of a major technology company after money transfer firm Wise (WISE) listed in July with an £8 billion market capitalisation.

In a direct listing, no fresh funds are raised, and the company doesn’t have to pay often expensive fees to investment banks to underwrite and market the shares.

Wise came to the market at 800p which means investors buying at the opening price would be underwater by around 4% at the current price of 769.4p.

AIM’S BIGGEST LISTING

Beauty products disrupter Revolution Beauty (REVB:AIM) was the biggest listing on the AIM market after it raised £300 million in July giving it a market capitalisation of £495 million.

Retail investors were not given an opportunity to invest at the IPO price of 160p, and the shares rose 3% on the first day of trading. Investors buying at the higher price have since lost 27% while institutions buying at the IPO price are down around a quarter.

RETAIL DISADVANTAGE

Data provided by the London Stock Exchange and analysis by Shares shows that retail investors have fared much worse than institutional investors in the IPO market over 2021.

Year to date the average gain since listing has been 25% based on the IPO placing price (i.e. the price available to institutional investors taking part in the offer). However, the average gain was only 10% based upon the market opening price on the first day of trading, being the first chance for retail investors to get involved.

That means retail investors have lost out to the tune of 15% on average by not being given access to IPO offers, in general.

IPO DISAPPOINTMENTS

Some shares struggle to maintain upwards momentum after they list. They can often retrace or stall following early excitement and the cannabis stocks are a good example.

Medicinal cannabis companies were given the green light to go public by the Financial Conduct Authority late last year. Cellular Goods (CBX:AIM) came to the market at 5p per share and the opening price was an astonishing 20p as investors raced to get hold of the shares.

They have subsequently fallen back to 7.7p leaving retail investors nursing losses of up to 61% if they bought at the top, while investors who were able to purchase at the IPO price are sitting on gains of 55%.

Best and Worst

Cyber security artificial intelligence firm Darktrace (DARK) joined the market in April amid some fuss about its links to Mike Lynch who is embroiled in a fraud trial.

The IPO price was cut to get the float away and the shares subsequently jumped 40% on the listing price of 250p and very quickly climbed to around £10 before collapsing back to the current 434p. Despite the drama, the shares are still up a respectable 74%.

After Peel Hunt initiated research on the stock with a sub-500p price target, profit taking set in, while insiders cashed in some of their shares adding to selling pressure.

The best performers have been firms operating in the resources sector. Bens Creek (BEN:AIM), which operates metallurgical coal mines in the US and listed in the middle of October, has seen its shares rise 255% from the IPO price.

Shares in strategic metals miner Cornish Metals (CUSN:AIM) have risen 214% since listing in February.

Two of the companies which did offer shares to retail investors at IPO have been among the worst performers. These are food delivery companies Deliveroo (ROO) and Parsley Box (MEAL:AIM), down 32% and 77% respectively.

Parsley Box, which delivers ready meals to the over 60s, came to the market in March at 200p. The shares gained 3% at the market open on its first day of dealing but they faltered in July after the company warned of slower sales growth following the relaxation of Covid-19 restrictions.

Food delivery company Deliveroo had one of the worst IPO debuts on record after dropping around 30% from the 390p listing price as investors balked at its dual class voting structure while there were also concerns over increased regulation protecting its workers’ rights.

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