7th May 2014 14:42
LONDON (Alliance News) - Energy technology company PassivSystems Ltd Wednesday became the second company to postpone or cancel a London initial public offering in 2014, raising fears that the recent surge in the IPO market in the UK may be stalling in some sectors due to concerns that valuations have become too lofty.
The company, which provides energy services for residential homes and optimises solar PV assets, had said at the end of March that it intended to list on AIM in April. However, it now says it has decided to postpone the decision.
"It is well documented that the IPO market has experienced some congestion in recent weeks, particularly in the technology sector where certain high profile IPOs have disappointed investors post listing," PassivSystems Chief Executive Colin Calder said in a statement.
"The board's decision to postpone the IPO process is reflective of this current market sentiment, and the process has been useful with positive feedback being received from fund managers. We look forward to continuing the commercial expansion of our business and to returning to the market at an appropriate time in the future," he added.
The London IPO market has recovered strongly in 2013 and so far this year, after several years of depressed activity in the wake of the financial crisis. The recovery in the market for new issues came as stock markets around the world also recovered, with some indexes pushing to new all-time highs this year.
In 2013, the London Stock Exchange saw 105 new companies listing on its markets, the highest number since 2007. Those listings raised a total of GBP15.7 billion. Royal Mail Group PLC, was the biggest listing, raising GBP1.7 billion, while 62 of the new companies listed on AIM, raising GBP1.1 billion between them. The technology sector saw 26 firms raise GBP1 billion.
In the first three months of 2014, twelve new companies listed on the LSE's main market, raising GBP2.5 billion, while 26 companies had listed on AIM, raising GBP1.9 billion.
Investment bank and stockbroker Numis Corporation PLC Wednesday said its first-half pretax profit almost doubled, helped by its involvement in a number of London IPOs. The IPOs it has worked on this year include those of AO World PLC and McColl's Retail Group PLC.
Independent AIM-focused broker finnCap also said Wednesday that it had benefited from the increase in corporate activity on the London market, with operating profit almost doubling in the year to end-April as it helped to raise GBP240.0 million, with 60 completed transactions, including three IPOs.
However, equity markets wavered in early April this year, as technology and biotechnology stocks were sold off, first in the US, and then in Europe. That sell-off was prompted by fears those sectors had become overvalued in the wake of high profile IPOs in the US in recent months, notably those of Twitter and King Digital Entertainment PLC.
The first sign that some IPOs were starting to struggle in London came in early April, when Matomy Media Group became the first to be pulled in 2014. The Tel Aviv-based company said it had got enough demand from investors to cover the IPO size it had set, but hadn't been able to meet UK listing rules that require 25% of shares in issue to be held by investors within the European Economic Area.
?There's a chance more technology IPOs could be pulled, but only those with unrealistic valuation expectations and racy multiples,? finnCap Chief Executive Sam Smith told Alliance News in an interview.
Smith said the overall flow for IPOs should continue, citing a lot of quality companies seeking to list on the public markets.
?We've got a few [companies looking to IPO] at the moment,? Smith said of finnCap's own clients.
?The consumer space is high up on the things we're working on, as well as a few life science companies. We're still looking at technology IPOs on businesses seeking realistic valuations with backing on the bottom line.?
Smith said finnCapp hasn't considered listing on the stock exchange itself.
It wasn't all bad news for the London IPO market Wednesday, as specialist lender and savings group OneSavings Bank PLC said it intends to proceed with an IPO on the London Stock Exchange's main market.
It was established to take on the assets and liabilities of Kent Reliance Building Society and is jointly owned by majority shareholder Kent Reliance Provident Society and OneSavings Bank Holdco Ltd, a subsidiary of funds advised by JC FLowers. It operates in niche sectors like specialist residential mortgages , buy-to-let mortgages, and loans for small- and medium-sized enterprises.
In a statement, OneSavings said it intends to use the gross primary proceeds of GBP41.5 million that it is hoping to raise to increase its common equity tier 1 ratio, support growth, and for general corporate purposes.
By Steve McGrath and Sam Agini; [email protected]; @stevemcgrath1
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