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Nearly half of IPOs listed since 2020 have halved their issue price

According to the analysis, covering the 1205 non-SPACs listed on exchanges in the UK, US and Europe, almost 84% of these IPOs are now trading below issue price, while 94 are down by at least 90%.

The firm said that the “IPO apocalypse” is not only caused by tech companies, as healthcare, consumer staples, communication services and consumer discretionary sectors have also underperformed significantly. 

In contrast, energy IPOs have been standout performers, trading above 40% on average, while utilities have also proven relatively defensive.

Number of IPOs on London Stock Exchange plunges

Neil Shah executive director for content and strategy at Edison Group said that while more relaxed listing rules “were not helpful”, the overall looser and fiscal policy contributed to the IPOs “boom and boost”. 

The US, meanwhile, under-performed its European and UK counterparts. US IPOs were off an average of 52%, while European and UK newly issued stocks were down 22% and 21% respectively.

Shah noted that the significant underperformance of US IPOs piled on top of the underlying fact that IPOs tend to be less liquid than longer established counterparts.

He explained: “That is because of lock-ups and unfamiliarity amongst the broader investor base. All of which means when you get a flight of capital to more liquid names, IPOs tend to get punished more harshly, which is why you see more extremes of IPO prices not reflecting their fundamentals.”

However, despite the negative backdrop, the research revealed that there may still be opportunities to be found. 

UK AIM IPOs fall to lowest levels since 2009

“Many markets and sectors have already significant de-rating and in addition to potential macro and valuation catalysts there appears to be significant liquidity available to exploit value opportunities,” Shah said.

The report goes on to identify the top 30 companies which, on the basis of four valuation metrics, appear most likely to offer shareholder value and potential returns, with Mister Spex, THG plc and Outbrain Inc. taking the top three spots. 

In the UK. THG PLC, Ignitis Grupe AB and Deliveroo PLC topped the list, while in Europe (ex UK), Mister Spex SE, Ariston Holding and Cherry AG look most attractive.

“We have focused on stocks with investment ratios that we feel are reasonably indicative of a solid financial and operational position and we would also suggest that secular themes such as digital transformation, net zero and healthcare innovation will continue to be elements in forming an investment decision.”

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