How 10 companies fared in new IPO boom
19th July 2017 15:27
by Ben Hobson from Stockopedia
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There was a big pick up this spring in the number of companies pushing ahead with a UK stockmarket flotation. After several months of quiet conditions, IPO activity was back on the agenda - which was great news for investors who crave a constant source of new investment ideas.
On the IPO front, City speculation has been rife in recent months about where the oil giant Saudi Aramco will choose to float a small slice of its shares. Some expect that move - which may happen in London - to value to the company at around $1 trillion.
What should retail investors make of Saudi Aramco IPO?
In the meantime, there was plenty going on in the second quarter. Analysts at PwC note that €2.2 billion was raised in 24 IPOs in London between April and June. That's a rise of 83% on the same period of 2016. Among the highlights of the new arrivals were and the biggest tech float since 2015, .
Just as promising is the outlook for new listings. PwC's research found that 81% of a surveyed 275 UK investors were confident about UK company growth prospects over the next three years. Indeed, they found that there was a feeling among UK investors that the Brexit negotiations would create opportunities despite the uncertainty.
For investors focused on small and mid-cap stocks, the outlook appears equally bright. Dan Nickols, the lead manager of the , recently told me that he was very confident about the pipeline of new issues he was seeing.
Given the performance of newly floated companies over the past 18 months, it's clear to see why investors like Nickols are so keen. Some of his major holdings have been among the top-performing IPOs in recent years. Among them you can count firms like , and .
With all this in mind, this week we took a quick look back at the performance of IPOs that took place between August 2016 and February 2017. There is no science in the selection - during that time there were roughly 40 IPOs on AIM and the Main Market, and we've taken a snapshot of them across markets, sectors and sizes.
| Name | Mkt Cap | Date Floated | % Price Chg since IPO | Industry | Market |
|---|---|---|---|---|---|
| Franchise Brands (FRAN) | £68.0m | Aug 2016 | +165.2% | General Retailers | AIM |
| Warpaint London (W7L) | £146.8m | Nov 2016 | +126.8% | Personal Goods | AIM |
| Luceco (LUCE) | £383.5m | Oct 2016 | +80.8% | Electrical Components & Equipment | Main |
| Ramsdens Holdings (RFX) | £45.6m | Feb 2017 | +74.4% | General Financial | AIM |
| ConvaTec (CTEC) | £5.99bn | Oct 2016 | +37.2% | Medical Supplies | Main |
| Biffa (BIFF) | £548.8m | Oct 2016 | +22.8% | Waste & Disposal Services | Main |
| Xafinity (XAF) | £219.0m | Feb 2017 | +14% | Investment Services | Main |
| Diversified Gas & Oil (DGOC) | £97.9m | Feb 2017 | +3.5% | Exploration & production | AIM |
| Hollywood Bowl (BOWL) | £240.0m | Sep 2017 | -1.0% | Travel & Leisure | Main |
| Van Elle (VANL) | £68.2m | Oct 2016 | -16% | Construction & Materials | AIM |
Leading the list, with a 165% price gain since it floated last August is AIM-quoted Franchise Brands, which controls a network of franchises including ChipsAway, Ovenclean, Barking Mad and MyHome. There was another triple-digit return at , a cosmetics business that listed last November and has since gained nearly 127%.
The largest IPO during the period was , a specialist in medical products and technologies, which has risen in price by 37% since its flotation in October.
Among just two losers from this snapshot are , which has traded in a very narrow range since its IPO in September, and construction business , which saw its shares slip on delayed contract news - leaving it down 16%.
Navigating the uncertainty of IPOs
It's undoubtedly good news that IPO numbers are showing signs of bouncing back. The performance of a number of newly listed firms has been encouraging, although they have had the benefit of buoyant market conditions.
For investors, a handful of IPOs have proved to be a rich source of profits in recent years, but they do come with challenges. These companies are typically less well understood by analysts and investors, which can make it difficult to value them.
As always, research is essential in understanding the growth potential and possible challenges of newly listed companies - but the evidence shows that some of them can deliver really impressive returns.
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Interactive Investor's Stock Screening series is written by Ben Hobson ofStockopedia.com, the rules-based stockmarket investing website. You canclick here to read Richard Beddard's review of Stockopedia.com and learn more about the site.
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Ben Hobson is Investment Strategies Editor at Stockopedia.com. His background is in business analysis and journalism. Ben researches and writes regularly on investment strategy performance and screening ideas for Stockopedia.com. He is the author of several ebooks including "How to Make Money in Value Stocks" and "The Smart Money Playbook"
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.