UKAug 18 2017

IPO frenzy shows 'dust has settled' since Brexit vote

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IPO frenzy shows 'dust has settled' since Brexit vote

A significant increase in the number of UK companies listing on the stock market this year is being hailed as a positive sign for UK investors.

There were a total 26 initial public offerings in the whole 2016, while there have already been 24 so far this year.

Oliver Brown, one of the few fund managers who only invests in UK initial public offerings, said he expects at least another dozen to occur before the end of the year.

Mr Brown, who runs the £9.8m MFM UK Primary Opportunities fund, said the rush to launch IPOs is significant because it indicates investors are “open to new ideas” rather than just huddling around the same predictable group of stocks.

It is also an indication that the UK economy has been performing better than expected since the EU referendum vote, he said.

"Many companies put off their IPOs in the second half of last year due to the uncertainty about the outlook for the economy. The fact the IPOs have been happening this year shows that not much has actually changed as a result of the vote.

"The dust has largely settled, in as much as it is going to, for companies [worried about Brexit].

"Business conditions are broadly favourable and so for the remainder of the year we expect business conditions to be broadly favourable for the IPO market.”   

The fund manager pointed out “niche” property companies have been particularly prevalent among the companies coming to market. Mr Brown said this is a consequence of investors seeking income from less-traditional sources.

The Residential Secure Income investment trust is one example, due to come to market later this year. Supermarket Income REIT, which buys the freeholds of supermarkets, is another example.

The largest IPO to come to the UK market this year is AIB, an Irish bank, which is jointly listed in the UK and Ireland.

The company came to market with a £10.9bn valuation, but is not part of the FTSE 100 because many of the shares are listed on the Dublin Stock Exchange.

Ed Legget, who runs the £585m Artemis UK Select fund, has invested in AIB shares. He highlighted the “attractive profit margins” being earned by the company.

Martin Turner, the long-time co-manager on the range of funds run by Gervais Williams at Miton, told FTAdviser his favourite company to come to market this year is Strix, which makes components for kettles.

Mr Turner said it’s a “mystery” how this company came to the market at such a low valuation.   

He added the current strength of the IPO market points to the fact smaller companies operate in niche areas of the economy that are largely unaffected by the wider economy.