London IPOs plunge as the City feels the shocks of war

London has seen a major slowdown on its capital markets this year as the shocks of war in Ukraine and soaring inflation sparked a plunge in the amount of cash raised through IPOs.

The London Stock Exchange saw 19 firms raise a total of £397m on its two markets between January and March, a stark fall from the same period in 2021 which saw 14 firms raise a combined £5.6bn, according to data from accountancy firm EY.

Global IPO value similarly slumped on 2021 levels with a 37 per cent decrease in deal numbers and proceeds down 51 per cent compared to last year.

EY’s UK IPO lead Scott McCubbin said it had been a difficult start to the year on the capital markets.

“There are strong headwinds as a result of the war in Ukraine, high energy and commodity prices alongside inflationary pressures and associated interest rates rises which are ultimately creating uncertainty for the future cash flows of businesses looking to float,” he said.

“These pressures combined with supply chain issues are likely to lead to a continuation of the weaker market in Q2 2022.”

London IPO activity in the first three months of the year was led by net-zero-focused special purpose acquisition company (SPAC) New Energy One Acquisition Corp, which raised £175m on the exchange’s main market, while Clean Power Hydrogen topped floatations on London’s junior AIM market with £30m.

China stormed ahead globally with Shanghai playing host to 37 IPOs which raised over $18.3bn. 

Combined with the Shenzhen exchange, China witnessed 24.3 per cent of global IPOs by number and 51.7 per cent in terms of value of capital raised. 

EY said the slowdown showed no signs of abating with economic headwinds set to continue throughout this year.

“The record-breaking IPO market in 2021 was always going to be difficult to follow, and unfortunately, the markets have been hit by a maelstrom of adverse factors,” said Helen Pratten, EY strategy and transactions partner.

“The market is cyclical, and it is hoped that activity will return later in the year, but in the short-term IPO-bound companies should remain alert to the right window to move, whilst retaining focus on driving their equity story so they remain an attractive option when markets open.”