UK IPO Market Could Dry Up For Remainder Of The Year

Aston Martin and Funding Circle, two high-profile companies that went public in London, aren’t fairing well as public companies — which bankers in the U.K. warned could hurt future IPOs for the remainder of this year.

According to a report in the Financial Times citing bankers, Aston Martin saw its stock fall 8 percent when it started trading in the U.K. — and Funding Circle, which went public late last week, saw its stock close down nearly 5 percent below its listing price in the first day of trading.  Bankers told the Financial Times that both stocks have been hurt by diverging opinions on the part of investors. When the companies went public the bankers said it was an opportunity for skeptics to express their views and thus the sell off in the newly public companies’ stocks.  “It’s certainly not the outcome that we would have liked,” said a banker involved in one of the deals. “We wanted to see articles about how the IPO market is fantastic. The reality is that we can’t do that.”
The Financial Times noted there is a real risk that the IPO market in the U.K. will see a big slowdown until the Brexit terms become more clear. “Generally IPOs coming to the U.K. market are asking quite challenging valuations,” Jonathan Clatworthy, director of investment management at Arbuthnot Latham, told the Financial Times in an interview. “We find a lot of IPOs are targeting valuations at the same level as the top players in their respective industries, without the track records to justify them.” One banker told the paper that the IPO of Aston Martin and Funding Circle offered investors pitches that ended up dividing them into a positive and negative camp. The banker noted both deals has supporters that were believers and people who were looking at the two companies with an old economy view of how things should be.