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Highlights
- IPOs and acquisitions are the two main options used by entrepreneurs and investors to exit from high-growth businesses.
- In the past decade, a shift from the more popular and traditional IPO method towards acquisitions and other alternatives is being witnessed.
- Several companies in the UK are rumored to consider listing, and some are them are already unicorns.
The first listing of the shares of a private company on a stock exchange is termed as initial public offering (IPO). It is an alternative method other than acquisition, which is used by entrepreneurs and investors to exit from high-growth businesses. The shareholders of companies realise the value of their shares through exiting. For creating a high-growth ecosystem, successful exits play a crucial role, as they make sure that new companies are created by proving that startups are a lucrative source of wealth and capital appreciation. After generating enough personal wealth, entrepreneurs usually become angel investors and return that wealth back to the ecosystem, which in turn leads to creation of an ongoing cycle of further ventures.
Before a drop-off in exit numbers by high-growth UK companies in 2019 by 5.5%, which was probably because of unpredictability in the public markets surrounded by Brexit negotiations and the General Election, the exit numbers witnessed a significant yearly increase of 160% from 2011 to 2018. But what about UK’s IPOs? Let’s briefly take a look at the IPO trends and the companies that are planning to go public.
IPO trends in the UK
The year 2014 was a peak period, with 25 IPOs in the year by high-growth UK companies. With a minimum of 18 IPOs between 2015 and 2018, the trend continued to remain relatively high. But in 2019, there was a decline of 59% with only nine high-growth IPOs, which was 10 times the overall decline in exit numbers in 2019. But despite the starting of a global pandemic, the numbers rebounded to 13 IPOs in 2020.
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Many companies have started drifting away from the IPO route towards the alternative exit route, acquisition, over the past decade. Another alternative route is called Direct Listing, under which new shares aren’t issued to the public, but instead the already existing shares are sold to them. An example is the Metro Bank which got directly listed on LSE’s main market in 2016. Another option is SPACs (Special Purpose Acquisition Companies), which are shell companies used to list companies, raise funding, and acquire private businesses by reverse takeovers. Despite having alternatives, the traditional approach of going public is still being followed by many companies.
ALSO READ: 5 IPOs that made a bumper LSE debut in 2021
Upcoming IPOs in 2021
Considering factors such as age of the company, number of employees, and funding rounds etc, several companies are anticipated to announce an IPO, many of which are already unicorns. These companies are in the typical growth stage to go public, or are rumored to be considering listing soon.
ALSO READ: IPO Watch: 7 Major upcoming London listings
Deliveroo plc (LON: ROO)
Founded in 2012, the British online food delivery company Deliveroo has recently announced its plans to list on the London Stock Exchange. Even though the company reported a loss in 2020, it is targeting for a valuation of around £8.8 billion, which is somehow contentious, as this will make it the largest debut on the LSE market over the past decade. The food delivery giant has strong equity finance measuring billions of pounds, and is also backed by huge investors such as Index, Amazon, and Accel Ventures.
PensionBee Group plc (LON:PBEE)
Founded in 2014, the leading online pension provider, PensionBee, has announced its plans for an IPO on the London Stock Exchange recently, with an estimated market valuation of £350 million. It is a successful B2C fintech company, which offers its users a platform to transfer their old pensions into one plan. This supports them in tracking, monitoring, making new contributions, as well as withdrawals online. Till date, the company has secure £40.1 million in 8 funding rounds.
Darktrace plc (LON: DARK)
Founded in 2013, the digital security company and University of Cambridge spinout, Darktrace, is about to launch its IPO this year, aiming to float £4 billion on the London Stock Exchange. The company claims to be on track to achieve this valuation even though one of its lead brokers, UBS, has pulled out due to compliance reasons. Till date, the company has raised £173 million in equity fundraisings, under 9 funding rounds. The company was initially developed as an AI system for cybersecurity, and since September 2018, it has a valuation of more than $1 billion.
Wise plc (LON: WISE)
Founded in 2010, London-based fintech company Wise is also anticipated to launch an IPO this year. The company was previously known as Transferwise, but recently it rebranded itself as it believes that it offers so much more than just transfers. Till date, the company has successfully raised a sum worth £305 million under 10 equity funding rounds. Wise has set out standards for international banking, by offering real time international money transfers on real exchange rates, multi-currency direct debits, and debit card services etc. to its consumers and SMEs.
Babylon
Founded in 2013 and leading the AI-based healthcare market, Babylon is expected to launch its IPO soon. Recently in February 2021, it was reported that the company is planning to go for listing on the US stock market, aiming for a valuation of over $4 billion. Even though the company hasn’t announced its IPO plans yet, it has been contacted by many SPACs, and it has expanded into the Asian and the US market after its recent fundraising round in 2019, in which it secured around £454
