Equity Capital Markets UK Trend Report

Equity Capital Markets UK Trend Report

Lexis®PSL Corporate and Market Tracker have conducted research to examine current market trends in respect of ECM transactions in 2019, using 2018 and 2017 ECM transactions for comparative purposes. We reviewed a total of 233 IPOs (131 on the Main Market and 102 on AIM) and a total of 522 secondary offers (289 on the Main Market and 233 on AIM). For our research on standard listings we looked at the 22 companies listing on the standard segment of the Official List in 2019 (by way of IPO, introduction or transfer from AIM). Our review of risk factor disclosure looked at 38 prospectuses (relating to 2019 IPOs or new admissions to the Market Market) and 10 AIM admission documents.

Topics included in this report

IPOs in 2019—Main Market and AIM

•             IPO deal volume—three-year comparative view and month-by-month analysis

•             IPO market capitalisation and gross proceeds—three-year comparative view and month-by-month analysis

•             Industry sector focus

•             Analysis of country of incorporation and operation

•             Case studies of the biggest IPOs in 2019

 

Secondary Offers in 2019—Main Market and AIM

•             Transaction volume—three-year comparative view and month-by-month analysis

•             Gross proceeds—three-year comparative view and month-by-month analysis

•             Analysis of secondary offer structure

•             Industry sector focus

•             Case studies of the biggest secondary fundraisings in 2019

Standard listings in 2019

Risk factor disclosure in 2019 IPOs

Legal and regulatory developments in Equity Capital Markets 2019

 

Report Highlights

•             IPO deal volume on the Main Market continued its downward trend at a more rapid pace, declining steeply by 45% from 2018 to 2019

•             Both aggregate market capitalisation and aggregate gross proceeds for Main Market IPOs in 2019 decreased compared to 2018, while average market capitalisation and average gross proceeds per IPO increased

•             Unfavourable market conditions appear to have deterred smaller companies from listing on the Main Market, but international companies continue to list in London despite Brexit, accounting for the largest IPOs in 2019

•             The investment and financial services sectors dominated Main Market activity, representing 50% of transactions and raising 67% of aggregate gross proceeds

•             Over half of the companies listing on the Main Market opted to list on the standard segment, which proved popular with industries traditionally associated with AIM such as mining, oil & gas and software. Meanwhile, listings on AIM in 2019 hit a record low, down 76% from 2018

•             Despite a large fall in gross proceeds and market capitalisation, AIM attracted larger companies than in the previous two years with average market capitalisation increasing to £128m

•             The effects of the Prospectus Regulation are being seen in transaction documents as companies appear to be reducing the number of risk factors disclosed in prospectuses

•             Secondary offerings by deal volume on AIM continued to decline, while Main Market fundraisings picked up slightly. Total funds raised across both markets also experienced a decline

•             Company expansion cited as the reason behind the majority of top grossing secondary offers in 2019

•             Placings remain the most popular structure across both markets. Rights issues are in decline on the Main Market although remain the highest grossing structure per transaction

•             The most active sector for secondary fundraisings by volume on the Main Market was investment, however mega deals in sectors other than investment impacted aggregate funds raised in 2019

•             Greater diversity was seen on AIM with secondary offering deal volume dominated by traditional AIM sectors such as oil & gas, computing and media

•             Large secondary fundraisings saw average gross proceeds raised per investment company on AIM exceed the average investment sector secondary fundraising on the Main Market

 

2020

The uncertainty caused by the Coronavirus (COVID-19) pandemic has largely brought the London IPO market to a halt. The first five months of 2020 saw only six IPOs on the Main Market and three on AIM. However, with governments starting to ease restrictions around the world, China Pacific Insurance (Group) Co Ltd successfully completed its IPO of GDRs on the Main Market under the Shanghai-London Stock Connect scheme in June 2020 becoming the second company to make use of this scheme since its inception in 2019.

By way of contrast, the secondary issue market has been highly active as companies seek to raise money to bolster working capital and protect their businesses during the challenging conditions created by the crisis. The majority of secondary fundraises have been structured as institutional placings and conducted by way of an accelerated bookbuild without the need for a prospectus. The Pre-emption Group temporarily relaxed its guidelines on 1 April 2020 to recommend that investors support listed companies undertaking issues of up to 20% of their issued share capital on a non pre-emptive basis subject to certain provisos including that a representative sample of existing shareholders are consulted in advance. The FCA has encouraged companies to apply the principles of pre-emption to those shareholders that participate in the fundraisings.

Cashbox placings have seen a rise in popularity as they enable companies to issue shares non-pre-emptively without the need for shareholder authority to disapply statutory pre-emption rights and can be done quickly. The largest secondary fundraising of the first five months of the year has been the cash box placing by Compass Group plc in May 2020 which raised £2bn in gross proceeds. New shares issued represented 12.3% of the company’s issued share capital. Compass Group stated in its placing announcement that the board had consulted with a number of its major shareholders prior to the placing and respected the principles of pre-emption through the allocation process. The fundraise also included a small retail offer through the PrimaryBid investment platform which is a trend we have seen developing in 2020 as a way to involve retail investors as an adjunct to an institutional placing.

To see the effect of the coronavirus crisis on secondary issues in 2020 see our tracker: Coronavirus (COVID-19)—ECM secondary issue tracker and news analysis looking at secondary offer trends in the seven week period from 1 April–20 May 2020: Coronavirus (COVID-19)—trends in secondary equity fundraisings (a subscription to LexisPSL Corporate is required).

 

Scope

The percentages included in the 2019 ECM trend report have been rounded up or down as appropriate and accordingly percentages may not in aggregate add up to 100%.

We have used the following thresholds in this trend report:

•             IPOs exclude introductions and transfers from AIM to the Main Market (except where otherwise indicated)

•             secondary offers include placings, open offers, offers for subscription and rights issues raising £10m or more in gross proceeds for the company

Market capitalisation has been calculated at the opening price on the day of admission. Where gross proceeds have been calculated, the figures refer to the gross proceeds received by the company and not proceeds raised by selling shareholders (if any), except where otherwise indicated.


 

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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.