A lift for listing

The IPO market has made a healthy rebound in 2014, but institutional investors would be doubly happy if the rise in listings was accompanied by moves to a more transparent allocation process.

Looking at the numbers, 2014 has done well so far. The UK’s main IPO market has seen a major revival according to research from Capita Asset Services and is forecast to raise £11.7 billion this year, well ahead of the £8.7 billion seen in 2011.

Furthermore, its research suggests that across the main market, international market and AIM, the UK will see a total of £18.5 billion raised for companies this year, the last time new issuance was this good was before the crisis in 2006, when £25.6 billion was raised.

While improving macro economic circumstances will no doubt play their part, the capital markets industry is also becoming much more switched on to the need for IPOs as a driver of economic growth and a way to boost returns for investors.

The newly independent Euronext has suggested it will seek to have a greater focus on IPOs than it did as NYSE Euronext. Dominique Cerruti, Euronext’s CEO, has stated that he wants the business to refocus on its mission of providing the capital needed to help European economies grow.

Similar ideas have also been put forward by the Federation of European Stock Exchanges, which earlier this year put together a task force to look at ways that the number of IPOs taking place in Europe could be increased, examining both the regulatory framework for listed companies and the role of stock exchanges, with a particular focus on small and medium-sized enterprises.

But what of the investors? Well the buy-side is also keen on improving the IPO market, though has been more focused on the technology side of things.

FIX Trading Community’s buy-side working group is currently working on a project to better automate the IPO process, led by Barings Asset Management’s Adam Conn. While automation is widespread in secondary market trading of equities, IPOs are still highly reliant on manual processes, which can be discouraging for a buy-side community that has largely adapted its whole business around electronic trading.

With the listing market already on the way up, new initiatives by investors and exchanges could help push things even further and see new records for public market capital raising in the next few years.