Listing in London

3 Firms Taking the IPO Plunge

The London market this year has seen a deluge of IPOs as improving fundamentals led the way for companies to seek stock market floats.

However, a few weeks ago it seemed as if London IPO’s had reached their peak, with investors demonstrating fatigue causing some IPOs to debut below their issue price and others to be shelved. AO World and Just Eat saw their share prices fall while Wizz Air cancelled its IPO plans altogether. More recently, AA shares dropped on their debut, while EasyHotel couldn’t garner enough demand for its IPO. 

However, it now seems that this has not dissuaded other companies from listing, with more floats announced, two of which will debut on the LSE’s AIM market for smaller, growing companies.

The first company is ClearStar, a UK tech company that conducts background checks for companies on employees and tenants. The company says it increased revenue fourfold since 2007 despite a global recession. ClearStar's revenue was $8m in the year to the end of December, while net cash from operations of $0.9m was not far off from EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of $1m. These are healthy numbers and may inject big interest in the stock which is also aided by being part of the UK tech sector; currently very much in vogue due to its growth potential. 

The second firm is Abzena, a UK biotech group listing on the AIM market at 80p a share, helping the company raise £20m by the placing of new ordinary shares and looking to give it a market capitalisation of £77.9m. 

The UK pharma sector has had a great deal of attention paid to it this year following the asset swap by GlaxoSmithKline with Novartis, but more importantly during Pfizer’s unsuccessful bid for AstraZeneca. This has raised the profile of the UK pharma sector which might have a knock-on effect for a new entrant like Abzena. 

Outside of the AIM market, Spire Healthcare set its IPO price range at 210p to 300p per share, which would value the UK private hospital group at around £1bn. Spire is listing up to 45% of the company in order to raise £315m which will be used to pay down debt and cover the listing itself.  The company, which operates 39 hospitals and 13 clinics across the UK, seems unfazed by the disappointing performance of some recent IPOs. 

However, it’s perhaps interesting to note that these companies all have something in common, something that sets their IPOs apart from the more recent consumer-facing IPOs of Just Eat and AO World. All three provide services which are far less discretionary and in far greater demand, unlike low-cost airlines, food-delivery sites or online appliance retailers.

This characteristic may be just what sets them apart from companies which have faced difficulties after listing in London this year.