10 June 2021
According to data from the London Stock Exchange, there have been 38 initial public offerings (IPOs) since the turn of the year and 71 since March 20201 – when the Covid-19 pandemic really began to grip markets. There have also been a series of reverse takeovers, including the completion of Chrysaor’s acquisition of Premier Oil.
In addition to new entrants, there have been a series of de-listings, with the likes of McCarthy & Stone and, more recently, RSA moving into new ownership, while Aggreko remains subject to a bid by private equity.
The changing face of the UK market is something investors should welcome and could present exciting opportunities, according to Brewin Dolphin, the wealth manager. However, such moves can also present some pitfalls for those taken in by the excitement of new public listings.
John Moore, senior investment manager at Brewin Dolphin, said: “The swathe of IPOs of the past few months shows a degree of confidence in investment markets that may not have been obvious to people focused on the front pages. This activity has presented some exciting choices and opportunities for investors and brought greater diversification in terms of sectors and company offerings to the London market. However, the flip side is that it necessitates a greater need for differentiation and financial advice, which we would always recommend taking before making significant financial decisions.
“There are some great new companies that will capture the imagination and have the potential to progress. In other cases, there is still something to prove from the business, either in executing the vision or getting wider investor buy-in from here. Regardless of that path, what unites them is that they are looking to investment markets for capital and a potential relevance to advance their proposition and take advantage of growth potential in this period of change.”
Five you might hear more about
- PensionBee – PensionBee is a pension consolidation platform that listed on April 21st, at 165p per share. The fintech company has signed up around 120,000 people since launching in 2014. John Moore said: “PensionBee fixes a longstanding problem in the pensions industry – which has increased as more people change jobs and build up multiple retirement pots. Its addressable market is potentially vast and is only likely to grow as careers become more varied and workers change jobs and professions more frequently – particularly as defined contribution pensions are substantially the only choice available to workers. Combined with financial advice, it could be a powerful tool.”
- Moonpig – Moonpig listed in February, amid an online retail boom brought about by the Covid-19 pandemic. The company – which sells cards and associated gifts online – saw revenues increase 135% in the six months to October 20202. John Moore said: “A few eyebrows were raised at Moonpig’s valuation ahead of its IPO, but the shares have surged since its debut. While an online card retailer may not sound like the most exciting proposition, analysts see the growth of its ancillary product offerings – like flowers and chocolates to accompany cards – as a significant opportunity. Moonpig has the ability to build a platform to service a fast-growing, yet fragmented, market.”
- Verici Dx – Verici Dx develops tests that show how a patient is reacting, and will react, to an organ transplant and is one of many small, but interesting, healthcare intellectual property development opportunities. The company’s share price has increased around 50% since listing, with £14.5 million raised. John Moore said: “The biotechnology industry was one of the most popular sectors for investment on the back of the pandemic with the recognition that innovation here could be accelerated in the changing approach to approvals and fast advancement of certain treatments. While interest has cooled to a degree in 2021, Verici Dx has still seen a very positive start since its IPO.”
- Virgin Wines – Virgin Wines is a direct-to-consumer wine retailer, operating on a subscription and pay-as-you-go model. Listed in March, the shares are broadly flat on their debut price. John Moore said: “Virgin Wines could easily be in the ‘something to prove’ category as, on the face of it, there seems to be little that separates it from the many other wine-delivered-to-your-home services out there. That said trading since listing has been better than expected and the brand and innovation of the business are points of distinction that could in time be leveraged.”
- Harbour Energy – Harbour Energy came into being following the takeover of FTSE-listed Premier Oil by Chrysaor earlier in 2021, creating the largest independent oil and gas company on the London market. John Moore said: “It might be a surprise to include and oil and gas company among the potential ‘hear more about in time’ category of recent IPOs, but if the oil price rally continues Harbour Energy could find itself in the FTSE 100 soon enough based on its gearing to price increases. While the future is undoubtedly about clean energy, the world will still need oil – at least in the immediate future – and innovation on maximising existing assets may give smaller operators like Harbour some additional drivers.”
Five with something to prove
- Cellular Goods – Cellular Goods makes everyday products from engineered cannabinoids (compounds found in cannabis used for medicinal purposes). Backed by David Beckham, the company debuted in February and saw its share price surge before falling closer to its IPO level. John Moore said: “There was a lot of hype around Cellular Goods’ listing, with it being the first business of its type to go public in the UK and its celebrity connection. However, the falling share price suggests that investors are beginning to question the company’s prospects in what is fast becoming a competitive market for cannabinoid products. Wider acceptance of alternative products like this still needs to be established.”
- Parsley Box – Listed in May, Parsley Box is the meal kit company founded in Scotland in 2017. The business specifically targets the baby boomer+ generation with its products, which it describes as ‘under-served’. John Moore said: “Parsley Box differentiates itself from the likes of HelloFresh and Gousto in an increasingly competitive market through its target customer approach. The pandemic has created a range of new consumer habits that look set to endure, with ordering meal kits to your home among them. Home delivery has often been seen as highly aspirational, but Parsley box will aim to benefit from little and often trade in its niche area.”
- Music Magpie – Originally a marketplace for previously owned CDs, Music Magpie has expanded to become an online re-seller of a range of second-hand consumer goods. Since launching the IPO in April, its share price has fallen around 3%. John Moore said: “Music Magpie has done a great job of re-inventing its business as consumer demand has shifted. The question is whether it can keep doing that in a tech sector that keeps prices coming down and, as eBay discovered, appetite for resale is more mixed than one might think. Why buy second hand when you can purchase the new model at a reasonable price?”
- Deliveroo – Deliveroo’s IPO was heavily publicised – largely for the wrong reasons. The food delivery company came under scrutiny for the rights of its staff and the sustainability of its business model, with the shares falling one-third on its debut and remaining some way off their launch since. John Moore said: “The big question on Deliveroo is about whether its business model is fit for the future. ESG has become a major theme in investment over the last 18 months, which saw many large institutional investors turn their back on the IPO. The company has some work to do articulating its vision for the future, to get investors on board, and to build out sustained economics away from a pandemic-influenced environment.”
- Round Hill Music Royalty Fund – The Round Hill Music Royalty Fund generates its revenue from music copyright assets. The fund owns the rights to a portfolio of songs, including tracks from The Beatles, Judas Priest, Bon Jovi, and Katy Perry. John Moore said: “Round Hill is one of a series of funds to have launched in recent years that lean on music royalties as an income source. As with all of them, it’s very difficult to say whether their catalogue will continue to be a long-term revenue source, accessing new markets through advertising partnerships and the like, or whether they will constantly have to add to the portfolio – which is capital intensive.”
“There are a range of companies either rumoured to be planning an IPO or which have confirmed they will. Made, the online furniture retailer, looks a decent proposition and the case for its business model has only been strengthened over the past two years. By comparison, Victorian Plumbing likely finds itself at the other end of the spectrum.
“Investing in IPOs can be a tricky process – there are a number of pitfalls, including a lack of third-party research and an asymmetry in the information available to management and new investors. If you are thinking about investing in businesses new to the market, it is a good idea to take professional financial advice before making a decision.”
ENDS//
For further information, please contact:
Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel: 07412 739 093
Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: (0) 20 3201 3026
Anita Turland: anita.turland@brewin.co.uk / Tel: (0) 20 3201 4263
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
NOTES TO EDITORS
Disclaimers:
The value of investments can fall and you may get back less than you invested., Investment values may increase or decrease as a result of currency fluctuations., Information is provided only as an example and is not a recommendation to pursue a particular strategy., We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk., Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness; RBC Brewin Dolphin is authorised and regulated by the FCA (Financial Services Register reference number 124444)
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £52.6* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £45.7* billion on a discretionary basis.
Our intermediary business manages £16.4* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service and the MI Brewin Dolphin Voyager fund range.
In line with the premium we place on personal relationships, we’ve built a network of 34 offices across the UK, Jersey and Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
For more information, visit: www.brewin.co.uk
*as at 31st March 2021.