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Home / Special Reports / The 2018 IPO Report

This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.

28 January 2018

The 2018 IPO Report

Spare a thought for investment bankers. No, really. After the 2008 financial crisis, it took years for faith to be restored in bankers, and accepting that both the fees charged and the lengthy process involved in taking their company public was worth it.

And then Brexit happened. And Trump was elected. Seemingly, years of work to restoring faith in the system had been dismantled in just weeks. Or had it?

2017 was the busiest year for global IPOs since the depths of the financial crisis in 2008, while 2017 proceeds were at their highest since 2014. With the value of IPOs surging, going public is back in vogue.

This report reviews the biggest IPOs of 2017, previews both the confirmed and unconfirmed offerings taking place in 2018, and provides details of how you can trade the biggest year for IPOs in years.

IPOs are back

2017 was a surprise for many – rocketing global stock markets alongside a healthy number of new public listings saw the year crowned the best in a decade.

Things got off to a fast start as Snap Inc became the second largest New York Stock Exchange listing ever when it debuted in March. The company raised $20bn, just shy of Alibaba’s largest ever IPO in 2014.

Meanwhile, London saw the value of its 77 IPOs in 2017 more than double 2016’s tally, according to EY.

Successful 2017 listings on the LSE include Alfa Financial, Allied Irish Banks, Eddie Stobart, EN+ Footasylum and Global Ports, with the total value of UK IPOs eventually reaching £13bn, despite some firms postponing listings amid uncertain conditions.

The big event of 2018

With concerns about the IPO market health fading, and after years of preparation, investors and traders are preparing for the most anticipated IPO ever.

Saudi Aramco, the $1.5tn Saudi state oil producer, is set to float 5% of the company, or $75bn, in London or New York in 2018, reports the FT. The IPO would be three times larger than Alibaba’s, and Aramco would become the world’s most valuable public company.

How can you trade IPOs?

Not all IPOs are open to the public initially, with the purchase of shares at the official IPO offer price often reserved only for the largest financial institutions. Therefore, we will review the alternatives available to traders, and how and when you can get involved.

Want to know more?

The largest of global IPOs tend to be heavily traded, with significant trading activity for weeks after the listing day. To get involved you need a trusted broker to keep you in the loop. If major news is announced when will you find out? That same day? The next?

The benefits of working with Accendo Markets speak for themselves: A dedicated trader will call you with accurate information in-time and on-time, not just some time, to make sure you are able to participate in the UK’s biggest IPOs in a cost-effective manner.

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2017’s Biggest Success Stories

The Irish government raised €3.4bn by listing 679m shares of Allied Irish Banks on the London Stock Exchange. Europe’s largest IPO was so oversubscribed that more shares of the €12bn bank could be offered in the future.

Alfa Financial Software, who notes Barclays in its client base, initially offered shares at 325p. However, its shares touched a high of 548p in 2017, 69% higher than its initial price to take its market cap above £1.5bn.

Potential UK Listings in 2018

IntegraFin            The £500m fintech firm is scheduled to be the first London IPO of the year, with the trading services provider for almost £30bn of assets expected to list in March, report the Financial Times.

Aston Martin       The sports car maker has hired Lazard to advise on a potential £2-3bn London float in Q2 or Q3 of 2018, according to Reuters, following competitor Ferrari’s successful 2015 New York listing.

Odeon                     The cinema chain is set to follow peer Cineworld with a Summer listing on the LSE, with parent company AMC looking to raise over £500m by undertaking a £1.5bn listing of Odeon, say Sky News.

O2                             Parent company Telefonica put its £10bn listing of O2 on hold for the second consecutive year in 2017, this time due to a delayed 4G/5G auction, however it still hopes to IPO in 2018.

Saudi Aramco      The eagerly anticipated flotation, expected in 2018 or 2019, would easily be the largest IPO in history. JP Morgan and Citigroup are advising the $75bn listing in London or New York.

Comparethemarket.com      Following GoCompare.com’s successful listing in November 2016, the price comparison website’s owner BGL is exploring a possible £2bn float in 2018.

Other UK firms expected to explore an IPO in the next 12 months are Brewdog, Pret a Manger, Sky Betting & Gaming and Vue Cinemas. Which of these companies do you think could return an attractive profit after listing?

And in the US?

Spotify               The music streaming service has filed to go public in the US, valuing the company at $15bn. The company will not offer new shares in an IPO, but instead list existing shares directly on the NYSE.

AirBnB                The real estate rental company turned its first profit in 2017, and also appointed its first independent board member, opening the door to a potential $30bn IPO later in 2018.

Uber                     With a new CEO, fresh faces in the boardroom and a fresh wave of external investments, the $70bn giant is targeting an IPO before the Autumn of 2019. Exactly when this will be is still a mystery.

Others that may explore IPOs are SpaceX ($21bn), Palantir ($20.3bn) WeWork ($20bn) and Pinterest ($12.3bn).

For examples of how you can trade the shares of a company following a public offering, a breakdown of IPO trading options, and how Accendo Markets can help you capitalise on these opportunities, turn the page.

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Post-IPO – How can Accendo Markets help?

If you are disappointed with your IPO allocation – whether you did not receive enough or any at all – and still see potential for a share price rise, you could buy the shares once they are listed. To save on costs and capital, CFDs are an alternative trading option on which no stamp duty is paid and a deposit of as little as 5% is required.

This option is for those that see growth potential in the company, or who expect demand from the investors who missed out pushing the price higher in the future. They also believe that this growth could lead to its inclusion on a major index like the UK 100 or 250, which could be a further driver, and may also find the implied dividend yield is attractive. Our traders can help you assess potential drivers to make an informed decision.

On the other hand, if you missed the chance to make a quick profit on the initial reaction as the shares traded for the first time, and believe there to be too much hype surrounding the IPO – overvaluing the shares ­– you could also use CFDs to short-sell shares, affording you the potential to profit from a decline in the share price.

There are cases for either approach, with Snap Inc (SNAP), Royal Mail (RMG) and the Bank of Cyprus (BOCH) are examples of too much hype with volatility and losses from the off, whilst BooHoo.com (BOO), Convatec (CTEC), Alibaba (BABA) and Facebook (FB) are good examples of slow burners. How will this year’s IPOs fare?

Note, past IPO performances may not reflect future admissions and are not a guarantee of future performance.

Pricing

IPO pricing tends to start in a range which is then revised up or down depending on institutional demand, then narrowed towards the upper or lower end of the range as time goes on and demand becomes apparent. This provides an approximate indication of the market value of the newly-listed company, although as Snap Inc proved, this can soon be amended once shares are freely floated.

Retail investors often have access to a portion of shares but often not quite as much as they might like, with the majority tending to go to long-term institutions such as pension funds, insurers and hedge funds.

Part of the service that our traders provide is to deliver breaking news on potential IPO dates of companies that you express an interest in, as well as notifying you of any changes to pricing associated with those IPOs.

IPO Timetable

Shares listing in the UK tend to start trading conditionally from Friday through to Tuesday, after which they gain full market listing and trade unconditionally from Wednesdays (normal schedule guide, subject to change). US IPOs tend to be quick affairs with a roadshow followed by pricing within a week before trading begins.

IPO Parameters

Newly listed shares tend to require CFD margins of 10-20%. Short selling is not available during conditional trading as shares are unborrowable, however they usually become available for shorting when trading goes unconditional a few days later. Guaranteed stops are usually unavailable until trading becomes unconditional.

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Want to take advantage of the above opportunities right now?

Whether you see UK Stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.

CFDs: Like shares, but more flexible

While buying 14,182 shares in Lloyds Banking @ 70.51p requires an outlay of around £10,000 plus commission, the same exposure via a CFD requires about £500 plus commission (see right-hand box; margin + costs). If a trader invests in Lloyds Banking, one would assume they believe the share price is likely to move in their favour. After considering the ‘worst case scenario’ and assigning funds to cover it, the trader may conclude there’s little point in exposing the full £10,000 to Lloyds Banking shares - some of that capital could be put to good use elsewhere in the markets. (Source: CMC, Prices indicative)

CFDs are leveraged instruments, but you don’t have to use leverage

If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure. The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up as little as 3%/£300 (note that overnight financing costs will still apply). The remaining £9,700 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!

What’s your view?

Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios download our ‘Comprehensive Guide to CFDs’ here.

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The Accendo Markets Research Offering

Does your current broker’s morning report tell you all you need to know about yesterday’s news? If so, how is it offering you anything more than the plethora of information already available on the internet?

We’re proud that our morning editorial has become a hot commodity in the City, its content quoted daily by the journalists that are writing the news everyone else will be reading later in the day, if not the next. Our morning report tells you what’s driving the market at that moment and what to look out for in the day ahead.

If a company has reported earnings before the market opens, we’ll tell you why the shares are called to open up or down in relation to that announcement.

As well as the Morning Report, signing-up to Accendo Markets Research & Trade Ideas offers you the chance to receive the following publications:

  • Another Level: A selection of key level alerts on various stocks.
  • Index Focus: A selection of key level alerts on the major indices.
  • Trade Alerts: Trading ideas from our analysts. What do they think is likely to move?
  • Macro Calendar: Live market-moving data, breaking news as it happens
  • Week in Advance: A summary of next week’s key events. Is there a trading opportunity there for you?

To ensure you can act as quickly as possible, you’ll receive an email with a link to the latest publication as soon as it’s released. You can unsubscribe from these emails at any time.

Based on a wealth of experience, gained from both large and small institutions, our Research and Trade Ideas are produced in-house. Our team of dedicated professionals comprises both analysts and traders, drawing upon a wide range of resources and methodologies.

Our aim is to provide you with the manpower and expertise you need to help you clarify, interpret and capitalise on the ever-growing volume of market information.

The journalists don’t pay for it and neither do you, so why not give it a go? You’ve nothing to lose and perhaps a little more to gain… Subscribe Today!

Page: 05

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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