Investors who bought into every London flotation of the last five years have lost almost £10 billion, analysis for the Evening Standard shows, in figures that lay bare the strife at the heart of the City.
With London struggling to attract new floats and most major tech companies preferring New York where share values are higher, our research makes plain why investors are shunning the Square Mile.
Since the end of 2018 there have been 216 IPOs (initial public offerings) in London, raising £25.8 billion in all.
Those shares are now worth £9.6 billion less than at flotation, with major flops including Deliveroo, Dr Martens and Trainline.
The average loss per pound invested was 28p.
Every single one of the 10 largest IPOs in the UK lost investors’ money – in fact these top 10 raised a combined £11.39 billion of which £5.6 billion was lost.
Alan Miller, chief investment officer of SCM Direct, said: “Despite the marketing hype and so-called expert valuations of these issues to the public and institutions, they rarely live up to their promises.”
He added: “One of the most surprising facts was that the largest floats gave investors no chance. Maybe because these involved even more brokers spouting even more hot air and ever more ludicrous valuations to win the lucrative mandate.”
The UK IPO market is in the doldrums, hitting an 11-year low. In the third quarter of 2023, only five IPOs were conducted, raising £359.8 million, representing a 36% decrease in proceeds compared with the same period in 2022.
The Government and the London Stock Exchange are aware of the problem and have been trying to loosen listing rules in order to attract fresh floats.
Mr Miller said: “It might find a better approach would not to be relaxing of the listing rules to set the bar even lower, but raise the bar by actually having more quality controls on these IPOs so that investors can trust the new IPOs.”
Data from investment platform XTB shows that 2023 was one of the worst years for IPOs in London.
Just 56 companies made applications to float on the main market of the London Stock Exchange in 2023, a 50% drop on previous years. Of these companies, just 30 were given the green light by the Financial Conduct Authority (FCA) to list their shares.
Joshua Raymond, director of XTB, said: “This data shows just how rapidly a stock market can lose its popularity. The decline in activity on the IPO market is particularly concerning for private investors. The listed stock market is the easiest and most widely understood way for retail customers to invest their money. We need a steady flow of new companies coming to the market, including businesses that can drive innovation and change, while offering fresh opportunities and ideas to the investor community.”
Companies looking to float on the LSE must first obtain approval from the FCA by submitting a prospectus to the regulator. In response to a Freedom of Information request the FCA revealed that between 2018 and 2022 an average of 112 companies submitted applications each year, far in excess of the 56 companies to have applied last year.
Equally an average of 70 companies each year were approved by the regulator between 2018 and 2022, more than twice the figure of 30 in 2023. The figures show that nearly half the companies that applied to float did not make it through to the end of the process.
