At the beginning of 2022, a whole range of companies were planning initial public offerings (IPOs) for the new year.
However, IPO plans were put on ice following Russia’s invasion of Ukraine and the resulting market turbulence.
It now looks as if the market is starting to thaw. In the past week three companies have announced their intention to float on the London market, which could inspire others to follow their lead.
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What is an IPO?
IPOs, new issues and launches are methods companies and fund managers use to raise money. By issuing shares or stock units to the public, and allowing them to trade on an exchange, companies and funds can raise additional capital.
A freely tradable stock can also allow founders and existing investors to cash out at a potentially higher valuation than they might otherwise be able to achieve. Moreover, as IPOs tend to receive a lot of press coverage they can help a company raise its profile. This can be good from a public relations perspective and can help the business build its reputation among consumers.
In a typical IPO, a private company will hire an investment bank (such as Goldman Sachs) to manage the process and drum up interest from its clients to buy the newly issued shares. The bank may also ‘underwrite’ the issue, essentially stepping into the market to make sure all of the new shares find a home (it will then sell the stock on the open market at a later date).
The aim of using an investment bank to manage an IPO is to increase interest in the offering and make sure the demand for the shares exceeds supply, pushing the stock above the offering price.
Public vs private companies
Most companies start off as private businesses. Therefore they will have to go through the IPO process at some point if they want to become a public company.
The main difference between public and private companies is the fact that public corporation shares are freely traded on an exchange. Public enterprises usually have to comply with stricter regulations and reporting requirements than private businesses.
For example, every public business must publish an annual report showing its income, balance sheet and cash flow statements. Most private businesses do not have to provide this level of information.
As IPOs tend to be quite expensive, other methods of private companies coming to market have been developed over the past few years.
In a reverse merger, a private company acquires a publicly-listed company without raising capital, which simplifies and streamlines the process. Another method is the direct listing. Under this method a private company sells its existing shares to the public without creating new ones, removing the need for an investment bank to act as an intermediary. “Special purpose acquisition companies” – Spacs – have also become popular in the US in particular.
Are the upcoming IPOs a good investment?
IPOs are not necessarily great investments. Many new listings jump on their first day of dealing, but it can be tough for individual investors to capitalise on this bounce as investment bankers and insiders are usually first in line to receive shares.
What’s more, as a company is usually trying to list at the highest price possible, it can be an expensive way to buy into an investment. As the US investor Warren Buffett once said, IPOs come “with an informed seller thinking it’s a pretty good time to go public.” That means it’s not very likely investors will be able to bag a bargain, although this does not necessarily apply to direct listings and reverse mergers.
Below is a list of notable upcoming IPOs. This is just a guide and may change depending on market conditions, deal structures and regulations, among other factors.
Upcoming UK IPOs
Sustainable Farmland Trust plc
IPO date: 12/09/22 This new trust is aiming to invest in a portfolio of US farmland assets. Its manager, Intl Farming Investment Management LLC, has identified a pipeline of $3bn of potential deals. The group already manages $2bn of assets for investors.
The new company is looking to raise £200m to invest in opportunities, and is targeting a net initial yield of 4.5% of its net asset value. It aims to achieve a net asset value (NAV) total return of between 7% and 9% per annum once fully invested.
This is the first farmland-focused investment company to list on the London market.
Independent Living REIT
IPO date: 04/11/22
Aiming to address the “shortage of high-quality supported housing” Independent Living is looking to raise £150m by way of a placing, offer for subscription and intermediaries offer.
It has identified a £500m pipeline of assets, including homeless accommodation, care facilities and specialist supported housing for adults with learning difficulties, mental health issues or physical disabilities
The firm intends to become a Real Estate Investment Trust (REIT) when it has acquired its initial portfolio of assets.
It is targeting a dividend of 5p per share for the first and second years following its IPO. Including capital growth, Independent Living is looking to grow its NAV at 7% to 10% over the medium term (on a total return basis).
Welkin China Private Equity Limited
IPO date: n/a
Welkin China Private Equity has announced its intention to float, but as of yet, no date has been set for the offering.
The company is looking to raise $300m to invest in a “broadly diversified portfolio” of Chinese private equity investments. Welkin, which will act as the trust’s investment manager, has plenty of experience with the Chinese private equity market.
According to its own figures, its investments have delivered a compound annual return of 28% to the end of 2021. The trust will be targeting a NAV total return of 15% over the long-term.
US/international potential IPOs
|Company||Description||Potential IPO date|
|Qlik||The Swedish analytics platform has filed documents to go public six years after it was taken private for $3bn. The price range and number of shares to be offered is yet to be determined.||2022/2023|
|Ampere Computing||The server chip maker backed by Oracle has filed its IPOs documents with the SEC, the US regulator, although there’s no timeline for its IPO.||2022/2023|
|Corebridge||US insurance giant AIG is selling 50% of Corebridge, its life insurance business. It’s targeting a valuation of $15.5bn.||H2 2022|
|Instacart||Grocery delivery unicorn Instacart filed to go public at the beginning of May after revenues hit $1.5bn in 2020||2022|
|The social network and message board recently hired its first CFO as it prepares for a public listing||NS*|
|Houzz||The home design website and community has hired Goldman Sachs to prep for its IPO||2022/2023|
|Porsche||The German luxury sports car manufacturer is in talks to debut on the Frankfurt Stock Exchange towards the end of 2022||2022|
Rupert is the Deputy Digital Editor of MoneyWeek. He has been an active investor since leaving school and has always been fascinated by the world of business and investing.
His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.
Rupert was a freelance financial journalist for 10 years before moving to MoneyWeek, writing for several UK and international publications aimed at a range of readers, from the first timer to experienced high net wealth individuals and fund managers. During this time he had developed a deep understanding of the financial markets and the factors that influence them.
He has written for the Motley Fool, Gurufocus and ValueWalk among others. Rupert has also founded and managed several businesses, including New York-based hedge fund newsletter, Hidden Value Stocks, written over 20 ebooks and appeared as an expert commentator on the BBC World Service.
He has achieved the CFA UK Certificate in Investment Management, Chartered Institute for Securities & Investment Investment Advice Diploma and Chartered Institute for Securities & Investment Private Client Investment Advice & Management (PCIAM) qualification.
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