- Speculation ramps up that Shein and Raspberry Pi will soon announce their UK IPOs
- Six London IPOs year-to-date with 40% average share price gain
- FTSE 100’s recent success raises the chances of more companies choosing the UK as a listing venue
- Short window to get floats away before market activity pauses amid summer lull and general election
“With the FTSE 100 enjoying a strong run and having hit yet another new record high, and an average 40% gain for the stocks that have listed this year, improved sentiment towards the UK market raises the chances of more companies listing on the London Stock Exchange,” says Dan Coatsworth, investment analyst at AJ Bell.
“Speculation is rife that Chinese fashion group Shein is on the verge of confirming its intention to list in London, as well as electronics group Raspberry Pi in the coming days. Both names would bring some sparkle to the market and potentially encourage other companies to take advantage of the new-found oomph in UK equities.
“Shein is such a big name in the world of retail that its mere presence on the London market could encourage others to look hard at the UK as a listing venue.
“It is now a household name in many parts of the world and that’s what many investors love to see when picking stocks. They want to find companies that everyone is talking about – just ask any teenager or young adult where they buy clothes and Shein is likely to be near the top of the list due to its attractive prices.
“The key negative is that Shein comes with more baggage than a celebrity takes on holiday. Questions continue to be asked about its corporate governance standards, working conditions, supply chain and accusations of intellectual property theft.
“Key reasons why Shein might choose to list in London are the more relaxed rules and requirements versus other venues like the US, and there is a risk that the UK develops a reputation for admitting companies with more questionable qualities.
“Therein lies a key problem. London wants to find ways to attract more listings but it must not tarnish its reputation by letting in bad eggs. Approximately 10 years ago we had a wave of Chinese companies flood the AIM market and most ended in disaster or disappointment.
“Shein wants to be seen as a global player and not simply a Chinese firm flogging cheap togs overseas. It will have to do things the right way and become a good corporate citizen to support this ambition, so it’s on a learning journey. London Stock Exchange will publicly welcome the company with open arms but behind closed doors it will no doubt be hoping Shein has no skeletons in its closet.
“Raspberry Pi will be a much smaller float if speculation proves correct it is about to list in London. However, its listing would still be significant as it brings a well-known name in the technology sector to the UK market – something of a rarity and hopefully the start of things to come.
“The UK is woefully under-represented in technology companies despite the country brimming with tech talent. We need a few more tech firms to list in the UK and give investors more domestic choice rather than them simply having to fish around the US market for tech opportunities.
“There is a short window to get more floats out of the door before the summer lull for corporate activity. Post-summer, there is the small matter of a general election which could halt IPO activity until companies know the lay of the land.
“Company advisers will be telling management teams they shouldn’t press ‘go’ on an IPO until they know who is going to be in power from a political perspective and what their policies are, as the uncertainty which comes before getting this information could cause market turbulence.
“There is nothing worse than a company floating on a stock market and seeing wild swings in its share price soon after.”
IPO activity in 2024
“IPO activity has been quiet in London so far this year with only six companies joining the market in the first four months. However, a 40% average share price gain since listing is noteworthy and could be enough to get more companies over the line with a flotation.
“The largest company to have joined the market is Air Astana, an airline previously part-owned by BAE Systems. Its performance is nothing to write home about. Instead, the best gains have come from domestic micro caps.
“We live in a world where consumers are paying a lot more attention to health and wellness and that is causing a shift in diets and food preferences. MicroSalt has a low-sodium salt aimed at food manufacturers and consumers. While it is still early days for the company, investors have warmed to the story and its shares have more than doubled in value since IPO.
“Helix Exploration joined the market on 9 April and its share price has already jumped by 85%. The helium exploration company has operations in the US and its share price performance is a perfect illustration of how investors have regained their thirst for higher-risk stories.
“Small cap miner European Green Transition raised £6.5 million at its AIM listing and its share price has since risen by 53%. Its team has a proven track record in buying distressed assets, improving them and selling them on.”
