Possible Stock Market Floats for 2017

2016 was the quietest year for initial public offerings (IPOs) in the UK since 2009. The uncertainty following the result of the EU referendum stalled a number of planned IPOs, but the slowdown wasn’t confined to the UK. The US also saw the number of companies going public falling to seven-year lows. The wider slowdown has a number of causes. Low interest rates make debt more attractive to companies looking for funding, while market turmoil early in the year, as well as political uncertainty surrounding the US election, will both have played a part.

However, with interest rates rising in the US and stock markets hitting record highs, 2017 could see issuing shares return as a popular way to raise funds. With that in mind we look at four companies rumoured to be eyeing the stock market.

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O2

O2 is currently owned by Telefonica, and rumours that the Spanish giant is considering an IPO of its UK business have been swirling for some time. With more than 25m customers nationwide, the group is one of the UK’s largest mobile operators, and also owns half of Tesco mobile.

Telefonica had previously tried to sell the business to Three owner CK Hutchison for £10.3bn, but the deal was blocked by EU regulators. If the company achieves that price tag at IPO it would be the largest flotation since mobile rival Orange listed back in 2001.

O2 has a long track record of ownership by private investors. The company was split out from BT back in 2001. Thousands of investors will remember their mmo2 holdings, which soon became O2 and then were bought out by Telefonica in 2005 in a £17.7bn deal.

If Telefonica decides to return O2 to public ownership, the company’s strong customer base would provide an excellent starting point for including private investors in the launch. That might have the added bonus of making customers stickier in what is a notoriously fickle industry.

BGL Group

2016 saw GoCompare.com split off from parent esure. 2017 could see rival comparison website CompareTheMarket.com join it on the stock exchange with owner BGL Group rumoured to be considering an IPO in the first half of 2017.

The website, which is BGL’s most high profile business, was launched in 2006, with its signature meerkats first appearing on TV screens in 2009. However, the group also operates a similar website in France under the “Les Furets” (the ferrets) brand, runs a life insurance business and offers support services for other insurers.

The other three big UK price comparison websites are already listed, which should mean that investors are familiar with the model and make a float easier. But why would investors be interested in yet another price comparison business? Well, it’s the most popular comparison site in the UK and grew revenues by 16% in 2015, compared to just 5% at GoCompare… Simples!

Sky Betting & Gaming

Private Equity firm CVC bought an 80% stake in Sky’s betting arm back in 2014, and there were rumours that an IPO was on the cards in September of last year. However, while CEO Richard Flint acknowledged that CVC will be looking to exit the business at some point, and an IPO is a possibility, there was no timescale at that time.

21st Century Fox’s bid for Sky has altered the situation somewhat. Sky still holds a 20% stake in the business and it’s unclear whether Fox will choose to retain it following the acquisition. The group has no gambling operations elsewhere, and faces strict gambling laws in the US. That might put an IPO back on the cards.

The group is currently eyeing international expansion into markets where Sky already has operations, targeting the German and Italian markets. The move follows a 51% increase in UK revenues in 2015/16. That was driven by a strong performance in the group’s sports betting operations, which saw revenues rise 64%, while online gaming (including Bingo, Poker and Casino) grew 36%.

Press speculation has suggested the group could be valued at £1.5bn, and (although three years is a relatively short term investment for a private equity fund) that would represent a healthy return on the £800m valuation CVC put on the group when they originally invested.

Darktrace

Away from consumer brands, cybersecurity start-up Darktrace is one potential debutant to keep an eye out for.

Founded by a combination of GCHQ spooks and Cambridge University academics, the group’s software uses machine learning and advanced probability mathematics to detect potential threats. The ability to act independently, drawing on inspiration from the human immune system, means that it can react to potential threats quickly and identify never-seen-before anomalies without relying on existing rules or assumptions.

Darktrace has so far raised over $90m, and was recently valued at $500m. The group reportedly told investors back in October that its ultimate ambition was to float on the stock market, but has since denied that there are any immediate plans to do so.

Nonetheless, with stock markets buoyant it’s one we think might yet make an appearance in 2017. We just hope that the group chooses to list in London, rather than following the depressingly well-worn path of British tech stocks heading for NASDAQ.

Other companies rumoured to be considering IPOs in 2017 include:

NameDescriptionPotential ValueAction
Vue CinemasVue has more than 200 cinemas worldwide, (of which 85 are in the UK and Ireland), servicing nearly 90m filmgoers a year.£1.5bnRegister for IPO alerts
Air AstanaThe Kazakh national carrier is considering an IPO in either London or Hong Kong.c. $6.5bnRegister for IPO alerts
KazMunaiGasState owned oil and gas company, considering London and Hong Kong as listing destinations.UndisclosedRegister for IPO alerts
SadiaHalal meat producer, currently owned by Brazil’s BRF. Considering London and Dubai.$5bnRegister for IPO alerts
IMG WorldsThe owner of the world’s largest indoor theme park is said to be considering a listing in London or Dubai.UndisclosedRegister for IPO alerts
Crawford HealthcareThe advanced wound care manufacturer has said it is looking “a little more closely” at an IPO following the successful ConvaTec listing last year.UndisclosedRegister for IPO alerts

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Any publication of an IPO or bond launch on our website is not an endorsement of the issue, nor is it solicitation for interest in the issue. Any decision to invest in an IPO should be made solely on the basis of the Prospectus, and supplementary information. The specific risks will be detailed in the Prospectus but the value of all investments can fall as well as rise, so you may get back less than you invested.

Companies subject to an IPO may not have a long track record and could be difficult to value or calculate a fair price for. IPOs and bond launches are therefore only likely to be a consideration for more diverse, larger portfolios. In many IPOs you will not know the purchase price before you commit to buy and therefore might end up buying at a higher price than you wished. If you have any doubts about the suitability of an IPO for your circumstances you should seek expert advice.

Original article from Hargreaves Lansdown here

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