Is the London Stock Exchange IPO market hotting up in 2021?

News of the London IPO market’s demise in 2020 appears to have been greatly exaggerated. By the looks of things, 2021 could see a flurry of new listings hitting the London Stock Exchange.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I have read that the coronavirus pandemic weighed heavily on the number of initial public offerings (IPOs) hitting the London Stock Exchange (LSE) in 2020. However, after taking a look at the data myself, I can see 50 IPOs in 2020 compared to 36 in 2019 (the lowest figure since 2009).

Number of IPOs on the London Stock Exchange from 2000 to 2020

Source: London Stock Exchange new issues and IPOs data

Through the London markets, companies conducting their IPOs raised £8.5bn in new capital in 2020. That is almost double the £4.4bn raised in 2019. The Hut Group, which describes itself as a digital-first consumer brands business, went public at 500p per share in September 2020. It alone raised £920m in new capital through the IPO, or around 11% of the 2020 total. 

Money raised in IPOs on the London Stock Exchange from 2000 to 2020 in millions of pounds

Source: London Stock Exchange new issues and IPOs data

The Hut Group’s share price has since risen to 717p, taking its market cap from £4.5bn to £7.14bn. Investors at the IPO price got a 43% return in just five months. But not all IPOs glitter like gold. Guild Esports, which owns and develops esports teams, had an IPO share price of 8.5p when it hit the markets in October 2020. Shares traded as high as 10p in October of last year but have since slumped, and now sit around 5.95 pence.

London IPO market revving up in 2021

Moonpig, an online greeting card company, went public last week with an IPO share price of 350p. Conditional dealing — which takes place before the shares are actually admitted to the market — took the market price of Moonpig shares to 450p. An investor in Moonpig might be happy if they snapped up shares at the IPO price. If they had a Stock and Shares ISA, they might have received an invitation to apply. Investors who bought after the shares hit the market would be nursing a 25p per share loss as the Moonpig share price has fallen back to 425p.

Dr Martens went public on 3 February 2021. Shares in the iconic British footwear brand hit the markets at around 450p — well over the oversubscribed issue price of 370p — and are now worth around 510p. And there are plenty of other companies rumoured to be going public through the LSE in 2021. Deliveroo’s founder and chief executive confirmed in late January 2021 that the company was working on plans for an IPO. There has been a lot of speculation Deliveroo could go public in the first quarter of 2021. That seems a stretch right now, but I would not rule out a floatation sometime this year.

IPOs to watch out for in 2021

According to Bloomberg, the LSE is pushing for the UK government to shorten the process for taking companies public. This would bring practices in the London market more in line with the US and continental Europe. The LSE is also said to support relaxing the 25% minimum free float requirement and allowing dual-class structures for premium market listings. This would certainly make fast-growing tech companies, like Deliveroo, look more favourably on a London listing.

Indeed, multiple tech companies are rumoured to be planning an IPO on the LSE this year. Darktrace, which offers an artificial intelligence-driven cybersecurity platform, is one of them. Transferwise, an online money transfer service specialising in cross-border transactions and foreign exchange, is another. The London IPO market does appear to be hotting up in 2021.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Happy parents playing with little kids riding in box
Investing Articles

A 9.7%-yielding FTSE 100 dividend gem that could create generational wealth

A sizeable investment pot that can be passed onto the next generation could be built with much smaller investments over…

Read more »

Investing Articles

Up 31%, do Lloyds shares have more to give?

Shares in major FTSE 100 bank Lloyds are on a charge. But what could be in store for the stock?…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Time to sell this FTSE 100 underperformer, says Goldman Sachs

Analysts at one investment bank have a ‘sell’ rating on FTSE 100 stock Diageo. But could a short-term weakness in…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 5%, Glencore’s share price looks a serious bargain to me now

Glencore’s share price looks undervalued to me, supported by strong earnings growth prospects and the potential resumption of extra shareholder…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’d invest £6,580 in this FTSE 250 REIT for £500 passive income

This FTSE 250 renewable energy enterprise is on track to become a Dividend Aristocrat! Here’s how I’d invest to earn…

Read more »

Investing Articles

Buying 1,000 of some dividend shares today unlocks £45 in weekly passive income!

These shares are among the biggest dividend payers in the FTSE 100. Should investors be buying them now to earn…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

If I’d put £5k in index funds 5 years ago, here’s what I’d have now

Investing in index funds is an excellent way to grow wealth with minimal effort. But how much money can investors…

Read more »

Investing Articles

10.2% yield! 1 of the top income stocks to buy in July?

A 10% yield's pretty rare, but this firm's been growing shareholder payouts for nine years! Does that make it one…

Read more »