IPO share prices rise against FTSE 100

IPOs on London’s main market outperform the FSTE 100 over the past two years, says Deloitte

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The share price of the 10 IPOs listed on London’s main market in 2011 and 2012 has increased by an average 19.2 percent over their listing price, according to research by Deloitte.

This compares with only an 8.8 percent increase for the FTSE 100 over the same period, according to the business advisory firm’s IPO Barometer, which examines the 10 main market IPOs during the study period.

‘A £1,000 ($1,550) investment in each of the 10 IPOs at the time of their listing would have been worth £11,920 [by the end of January],’ explains Deloitte in a press statement. ‘The same investment in the FTSE 100 would now be worth £10,880, a difference of £1,040.’

This represents a big turnaround for the IPO market compared with 2010 when the share price of the 12 main market IPOs was more than 40 percent lower than the FTSE 100 – something Deloitte attributes to economy and growth worries across the eurozone.

‘There is a misconception that IPOs are a bad investment and that it is better to keep your money in already listed stocks; 2010’s results perpetuated this view,’ explains John Hammond, head of Deloitte equities capital markets, in the company press release.

‘Our analysis shows the picture is changing, as recent IPOs have performed 11 percent better than the FTSE. This is a striking differential and shows that IPO valuations are now being set at a level where investors can make a superior return.’

Hammond says the research can be taken as a sign of a more optimistic year for companies looking to float their business over the coming year. ‘Together with a rising FTSE and reduced volatility, there is a far more positive backdrop for the IPO market in 2013,’ he notes.

In a further boost to the London IPO market, the LSE this week revealed plans for a new high-growth market designed to lure medium-sized, fast-growing firms to the UK by allowing them to hold onto as much as 90 percent of their shares. The high-growth segment – which has a 10 percent free float and is largely aimed at attracting tech companies – is set to launch in March.