Britain has passed its first big test of post-Brexit investor sentiment, with Calisen Group successfully listing on the main London market at a £1.3bn valuation in the biggest European flotation of the year so far.
The smart meter company, backed by US buyout group KKR, raised £328.8m by listing on the London Stock Exchange with a share issue at 240p apiece — just below the midpoint of its initial range of 225p to 265p. Shares moved higher in early trading. It was the largest UK domestic float since Trainline’s £1.1bn share sale last June.
Calisen’s float bolstered hopes of a revival in London initial public offerings, which had ebbed to the lowest level since the 2009 financial crisis. Just 34 companies joined the London Stock Exchange last year, less than half 2018’s total, with new equity raised shrinking from over £6bn to just £3.7bn, LSE data show.
Brexit uncertainties and sterling volatility have taken the blame for choking off the flow of new issues, as well as for UK market underperformance that made other venues more attractive for raising fresh capital. The FTSE All-Share gained just 14.2 per cent in 2019 while most US, European and global stock benchmarks all advanced by around 25 per cent.
“There is little suggestion the pipeline of companies ready to go public had slowed — it was more that political conditions didn’t support decent liquidity and valuations,” said Simon French, chief economist at Panmure Gordon.
“There’s always a reason to delay a public offering if you look hard enough . . . But domestic uncertainty in the UK has undoubtedly pulled back from the elevated levels of the last few years. This makes it easier for firms looking to come to market and attract an investor base that is looking for added exposure to UK assets, having been underweight for a number of years.”
Globally, flotations have been getting more scarce as cheap debt financing and a glut of private capital have pushed back the need for companies to go public. The increasing influence of passive investment strategies may also have depleted the number of active fund managers able to support flotations.
Investors also point to the recent poor performances of Aston Martin Lagonda, the luxury carmaker, and specialist lenders Funding Circle and Amigo as knocking confidence in the quality of companies choosing to list in London. Floats designed for private equity to cash out also have a reputation problem following numerous high-profile flops including Saga, AA and Pets At Home.
Just five private equity-backed companies used London as their float venue last year, Bloomberg data show. They were also among the year’s top performers however, with Trainline and Watches of Switzerland, from the stables of KKR and Apollo respectively, both climbing more than 40 per cent to date.
Investors said that while New York would remain the default venue for technology IPOs, the depth of the UK capital market should allow London to retain a significant comparative advantage over central European jurisdictions. Private-equity backed companies said to be weighing up a UK float in the near future include Interswitch, the Lagos-based electronic payments group, and sector peer Paysafe. Dr Martens, the iconic bootmaker owned by Permira, and the Doughty Hanson-backed cinema chain Vue were candidates for flotation later in the year, according to brokers.
Calisen was acquired by KKR from Infracapital in 2016 at a reported price tag of about £1bn. The company, which is better known for one of its business units, Calvin Capital, leases smart meters to utility companies that then fit the devices in homes. It receives a monthly rent for 10-15 years as long as the device remains in a property.
Conditional dealings began on the LSE on Friday with shares rising to 249p in early London trade. Unconditional trading is due to start on Wednesday, February 12.
