IPO fever is currently sweeping the UK. In the last few months, the likes of Deliveroo, musicMagpie, Darktrace and Trustpilot have all gone public.
With a number of other companies already announcing an intention to go public, it seems London is set for another fantastic round of IPOs. We take a look at a few notable ones to keep an eye out for.
What exactly is an IPO?
An initial public offering (IPO) occurs when the shares of a private company are first listed on a stock exchange, making them available for purchase by the general public.
The primary purpose of an IPO is to raise capital for a company.
This capital can be used for various purposes. This includes geographical and product expansion, settling debts and liabilities, and so on.
How many IPOs have occurred so far this year?
So far, 2021 has been a red hot year for IPOs in the UK.
According to financial services company EY, more funds were raised in the first quarter of 2021 through IPOs than in any other opening quarter since 2007.
The total amount raised in the quarter was £5.6 billion, which is more than half of the £9.4 billion raised in the whole of 2020.
£5.2 billion of this came from 12 initial public offerings (IPOs) on the main market of the London Stock Exchange, with £441 million coming from the Alternative Investment Market (AIM) for smaller companies.
The high number of IPOs in the first quarter of 2021 contrasts with the same period last year, when only three new listings were made on London’s main market and two on the AIM market.
The tech sector has led the IPO charge. A large number of companies in this sector have been insulated (or even flourished) during lockdown as consumers turned to online services.
According to EY, the increase in UK IPO activity, which began in the latter half of 2020, is expected to continue as confidence in the post-pandemic economic landscape grows and the UK’s credentials as an international leader remain strong.
Which are the most notable upcoming UK IPOs?
IG has identified eight upcoming IPOs in the UK that investors should be on the lookout for.
Here is a list of these IPOs together with their estimated market capitalisation.
Estimated market cap
Oxford Nanopore Technologies
Jaguar Land Rover
How can I invest in IPOs?
Retail investors interested in participating in the upcoming UK IPOs can do so through a broker who has access to them.
One of the top options in this regard is IG.
When you open a share dealing account with IG, you will have the opportunity to buy the stock of certain companies at the same time and price as institutional investors – before the official IPO.
You’ll receive your share allocation on the IPO date and will be able to trade the stock once it has been fully listed.
Is it a good idea to invest in an IPO?
Well, that depends on your risk appetite.
Some IPOs can perform spectacularly well and provide investors with massive gains. Others can disappoint and potentially lead to losses. A prime example of an IPO where things went wrong is Deliveroo. The company’s share price plummeted by 30% following its listing.
Before buying IPO stock, the most important thing to do is to research the company and its business fundamentals. Documents such as prospectuses and admissions can provide you with the information you need and give you an idea of whether a company would be a good investment choice.
Remember that a company that is a good investment will still be a good investment even after the IPO. That’s why, for novice investors, it may actually be best to wait until after the IPO. By then, the hype has died down and the stock has stabilised and found its true value.
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