Further evidence of the damage caused to the City by the credit crunch emerged yesterday, as the money raised from companies listing on the London Stock Exchange plunged by 90 per cent in the first three months of the year. This comes as a record number of companies decided to shelve their plans to list on markets across the globe.
The value of listings of British companies spiralled from $3.2bn in the first quarter of 2007 to just $325m in the corresponding period this year, according to a report from accountancy group Ernst & Young. Nine companies followed through with their intention to list, one on the main market and the rest on AIM. This compares with 23 flotations last year.
David Wilkinson, IPO leader at Ernst & Young, said it was a very weak quarter for London in terms of the number and value of transactions. "This doesn't come as a huge surprise given the credit crunch, volatile conditions and generally weak sentiment," Mr Wilkinson said. "Companies are doubtful that they will be valued sensibly if they list in these market conditions."
One lawyer who works on IPOs in London said he did not expect any significant activity on the main market until at least September of this year.
Mr Wilkinson said: "Listing is largely sentiment-driven. While it remains as bleak as this, companies will sit on the sidelines and wait. There is unlikely to be much activity until the back end of the year."
The report, Ernst & Young's quarterly Global IPO Update, found that the value of IPOs worldwide had fallen 60 per cent to $40.9bn between January and March, from $102.1bn the previous quarter. This heavy fall occurred despite the successful flotation of Visa, which raised $19.1bn, the largest IPO in US history.
Ernst & Young revealed that a record 83 companies had pulled their IPOs worldwide, while a further 24 had postponed the move. Mr Wilkinson said: "These are only the ones that had officially announced their intentions to float and have formally withdrawn that intention. That is the tip of the iceberg. Many others would have been quietly working towards a float and shelved their plans."
As the slowdown in the West intensified, the emerging markets continued to experience activity. Three of the top 10 IPOs were Chinese, and China and Indian companies raised $12.6bn between them.Reuse content