IPO broker feels the need for speed

Peel Hunt is continuing its mission to singlehandedly reanimate London’s equity capital markets. Today the City bank launches an “IPO speedometer” to give “a numerical score (0-60mph) for the health of the UK IPO market.”

The speedometer indicates whether the window is open in increments between “closed” and “hot”, just like a car’s speedo doesn’t.

Y tho?

IPOs require a lot of planning, and a significant commitment of management time and money in their preparatory phase. Not being able effectively to evaluate whether an IPO window is open, or, more importantly, whether it will likely open / remain open / close in the short term, is a significant issue for private companies looking to float.

Thirty metrics go into the speedo, whose current reading of 24mph puts it “in second gear”, Peel Hunt writes. Acceleration from 15mph in January is encouraging unless the UK IPO market is in a built-up area near a school.

The key drivers of the acceleration this month were an uptick in successfully completed European IPOs (e.g. Renk, Galderma and Douglas, as well as Air Astana in the UK) although with mixed aftermarket performance, positive broader UK ECM activity and performance, and an improving overall equity fund flow picture despite continued outflows in the UK.

To make sure its speedo isn’t a rear-view mirror, Peel Hunt includes qualitative measures including an “AI-driven assessment of Peel Hunt sales and research”. Gossip from media and accountants gets counted too, as does “evidence from Peel Hunt pilot fishing and early look processes that long-only investors are engaging on deals.”

And to be clear, the speedo is not a dipstick.

Unlike traditional litmus tests, it will not be a perfect science – for example there will always be the potential for major global events to completely change the landscape – but the analysis should give companies and market participants an indication of how open or closed the IPO window is, or by how much conditions need to change for IPOs to become a possibility again.

A list of companies the note references as being rumoured to be considering a UK float is fairly long — Aoti, Applied Nutrition, Boots, Canopius, Ebury, FNZ, Klarna, OakNorth, Raspberry Pi, Shein, Starling Bank, Thought Machine, Unilever Ice Cream, Waterstones, Zilch and Zopa — and (the currently lossmaking) Peel Hunt will want to be on its share of the tickets.

Its IPO speedometer therefore offers potential clients a more nuanced view of ECM activity than prevailing doomsterism from the likes of Steven Fine, Peel Hunt chief executive, who said last week that on current trends London “will end up just like the Irish market, which is dead.”

We can expect a speedo readout from Peel Hunt every other month or until the wheels come off.

Further reading:
— Peel Hunt’s cunning plan (FTAV)
— How to fix London’s markets (FTAV)