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London markets are “in the embryonic stages” of a rebound in corporate dealmaking, the boss of stockbroker Peel Hunt said, as he warned that the outlook for public listings remained bleak.
Steven Fine said the likelihood of a surge in London initial public offerings was “limited”, as consistent outflows from UK equities were “draining away support and causing valuations to stay low”.
“I do not think there is any shortage whatsoever of interesting companies that would choose the UK as a jurisdiction to list. The problem is that [there have been] 41 consecutive months of outflows,” Fine said. “Who’s going to buy them?”
There needs to be “far greater attention” to de-equitisation of the UK market, Fine said, as the company announced half-year results in which it swung back to profit on the back of a rebound in M&A.
His warning came days after Just Eat Takeaway announced it was delisting from the London Stock Exchange and follows a flurry of takeover bids for UK companies including Aviva’s £3.3bn offer for smaller rival Direct Line and US-based Fortress Investment Group’s deal to buy pub and restaurant chain Loungers.
M&A is “great, but you’re losing companies”, Fine said, noting that this year, 100 London-listed groups will either have been bid for, delisted or taken over.
In results posted on Friday, Peel Hunt reported a pre-tax profit of £1.2mn, compared with an £800,000 loss the previous year, thanks in large part to a resurgence in UK dealmaking and work on two IPOs. Group revenue grew 26 per cent to £54mn.
Peel Hunt said there were 19 active bids for FTSE 350 companies during the six months to the end of September, compared with just two in the previous year, “reflecting greater corporate appetite and confidence in the outlook for the UK”.
“Our second half will probably be driven by M&A, it will not be driven by IPOs,” said Fine, pointing out that even if London saw a “bonanza” of 50 new IPOs in the next year it would still net down 50 companies, having lost 100.
The company worked on two IPOs in the year — the flotation of low-cost computer maker Raspberry Pi and medical technology group Aoti.
According to a government-commissioned review, the number of companies listed in the UK fell about 40 per cent between 2008 and 2021. In the third quarter of 2024, 1,720 companies were listed in London, a decrease of 45 compared with the previous quarter, according to data provider Statista.
“Do we care about public markets? We don’t seem to care,” he added, noting that the entire market capitalisation of the FTSE 250 was the same size as Costco. “These are things we need to be a bit more alarmed about.”
Fine struck a gloomier tone on Friday than in June, when he said “a switch” had been flicked on City sentiment after Raspberry Pi’s IPO raised hopes of an upturn in London’s listings market. He said a flurry of secondary share sales, in August, September and October “put a malaise back on a market that was doing its best to recover”.
“I am optimistic about the fact that London is a very good jurisdiction for listing,” Fine said. “We’ve got to fix the demand side.”
“We need to focus on our competitive position and to figure out why are we lagging? Why are we losing so many companies?” he added.
“We are watching this market drain away in front of our eyes . . . You’ve got two solutions — mandate or incentivise. We’re at a massive tipping point.”
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