Corporate Financing Analysis - Too Much Of A Good Thing? Two IPOs Withdrawn In London - 13 NOV 2017

After a solid flow of deals on the London Stock Exchange (LSE) across the course of the y-t-d period, activity on the bourse appears to be running out of steam as we approach the end of 2017. Indeed, the UK IPO rally's solid performance this year, which has seen USD5.2bn raised by issuers, has certainly surprised to the upside ( see ' UK IPO Arena Continuing To Surprise ' , May 17 2017) and with the benchmark FTSE 100 index now at a record level, there is growing consensus that the run does not have much further to run.

BMI highlights that the warning shots have already been fired. Late last month, business services from TMF shelved its proposed float after questioning investor sentiment towards local equities and instead turned to a EUR1.75bn sale to PE firm CVC Capital Partners. This deal alone serves to highlight two emerging trends: the recent return of withdrawn floats and the rising popularity of the 'dual track' process, whereby firms file for a public market listing while at the same time searching for a potential M&A suitor, with the avenue offering the highest return ultimately chosen - and in the case of TMF, it was with the latter. So far this month, TMF was recently joined by mobile phone mast operator Arqiva, which has now adopted its own dual track process, and food supplier Bakkavor which both stalled their proposed floats on the LSE, with the former postponing and the latter abandoning its attempts altogether. Significantly on a qualitative basis, the Arqiva deal would have been the largest on the UK bourse so far this year and would have value the firm at GBP4.5bn. Meanwhile, Bakkavor's pulled deal would have valued it at GBP1.4bn. Beyond the shelved deals, another warning shot came from a deal which did successfully cross the finishing line: the listing of Russian conglomerate EN+ Group ( see ' Home And Away: Privatisation Drive Sparking Russian IPOs ' , October 11 2017) saw the firm price its stock at just USD14, the lower end of its indicative range. Adding insult to injury, the firm's stock sunk in the aftermarket following its debut too.

According to data provider Dealogic, there have now been four withdrawn floats in London so far this year, three of which have occurred within the last month. While this remains below the five such withdrawals recorded during the 2016 full-year period and even further south of the nine such deals recorded in 2015, we highlight that there is still around half of the final quarter still left to run and, subsequently, that number could still rise higher before the year is out. While we acknowledge that we are currently talking about individual deals, such developments do suggest that there is plenty of reason for both issuers and equity capital market (ecm) investors to proceed with caution.

A Quiet Year Until Q417
Withdrawn UK IPOs By Deal Volume
Source: Dealogic , BMI

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