UK Financial Firms Spur IPO Optimism as Europe Rebound Stutters

Potential initial public offerings by a slew of UK financial services firms could drive the next stage of Europe’s recovery after momentum in new listings slowed sharply.

Such hopes have arisen after Bloomberg reported that backers of Canopius Group are exploring an IPO for the the Lloyd’s of London insurance firm. An IPO is also among the options being pondered by Banco Santander SA for its UK payments subsidiary Ebury, Bloomberg has reported.

Meanwhile, the publication of Revolut Ltd.’s annual accounts has sparked chatter about an IPO at some point in the future. The British challenger bank said it was bringing its “financial processes in line with the standards expected from publicly listed companies.” Having previously said it wouldn’t consider listing in London, Revolut seems to have since softened its stance.

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IPOs by these companies would be a shot in the arm for a market that’s been flagging after a relatively bright start to the year. With €13 billion ($14.1 billion) worth of IPOs, it was the best first-half showing for Europe since the 2021 IPO boom, yet that figure is just a quarter of the amount raised three years ago, data compiled by Bloomberg shows.

Hopes for a second-half rebound were dealt a blow when sneaker maker Golden Goose Group SpA shelved its Milan IPO, and clothing retailer Tendam was reported to have postponed plans to list in Madrid.

Adam Cox, Capital Markets Director at PwC UK, said financial companies are ideally placed to take advantage of investors’ demand for new shares as they are profiting from high interest rates and improving economies.

“The UK also has a strong reputation for financial services which underpins some of the activity here – when the equity story centres around a UK based business with either domestic or international growth plans, there will be a substantial investor pool in the London market,” Cox added.

Back in 2021, London had a 25% share of the European IPO market — the largest of any city — but this year, its only notable new listing was a £166 million ($211 million) deal from computer maker Raspberry Pi. Online fashion retailer Shein has confidentially filed papers for an IPO in the UK capital, but the company is still awaiting approval from Chinese regulators, Bloomberg News reported in June.

Listings by financial services names could well fill the gap, especially if stock markets steady after a period of turbulence. Carlton Nelson, head of corporate broking and PLC advisory at Investec, said he remains optimistic.

“I believe that we’ll see further IPO momentum building over the remainder of 2024 as issuers take advantage of the current low volatility environment, ahead of a broader market pickup in 2025,” Nelson added.

Photograph: Skyscrapers in the Square Mile financial district of the City of London, UK, on Wednesday, July 17, 2024. Photo credit: Chris Ratcliffe/Bloomberg