A flurry of activity on Wall Street and in London will end a quiet period for stock-market flotations.
A packed Wall Street IPO schedule featuring Airbnb and a clutch of Silicon Valley start-ups was put in the shade today when The Hut Group confirmed it will list in London this month.
Manchester-based Hut, which is a digital-first consumer brands group, will be valued at £4.5 billion in what will be the biggest IPO to take place in the UK for several years.
While the initial offer is only being made available to City institutions, retail investors will hope that the flotation signals the end of a barren spell for new issues on the London market.
UK-focused investors have cast envious glances at Wall Street, where the tech boom driving US markets to record levels has laid the ground for robust debuts by the recently-listed online car seller Vroom (NASDAQ:VRM) and business intelligence platform ZoomInfo Technologies (NASDAQ:ZI).
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Home rental company Airbnb, data analytics business Palantir and food delivery operation DoorDash are among other companies expected to follow suit by the end of the year, as they look to take advantage of favourable market conditions.
At the start of last week, Silicon Valley-based cloud data platform Snowflake, real-time 3D content specialist Unity and workplace software firm Asana also confirmed their intention to list.
There have been just 16 new issues in the UK so far this year, compared with 43 two years earlier. The addition of six international stocks takes the total amount raised in London this year to just over £2 billion, most of which was from China Pacific Insurance in June.
London's most recent arrival was Australia's Castillo Copper at the start of August, boasting a market cap on admission of just over £20 million. The coronavirus pandemic put many potential IPOs on hold earlier in the year, with investors having to go back to Trainline (LSE:TRN) in June 2019 for the last big market debut after the booking app was valued at £1.7 billion.
Lacklustre market conditions in the UK, particularly in light of ongoing Brexit uncertainty, also killed off the chances of an IPO for Walmart-owned Asda, while Vodafone (LSE:VOD) recently chose Frankfurt for next year's planned IPO of its European towers business.
The focus of capital markets has instead been on share placings — often without the involvement of retail investors — in order to raise cash to prop up coronavirus-hit balance sheets, such as the £2 billion secured by caterer Compass in the summer.
Will Hut be a hit?
London's recent barren record for IPOs makes The Hut Group such a big deal, particularly given the added bonus that it is a tech-based flotation of the kind so loved by US investors.
The company gave further details of its IPO plans in a brief statement today, noting that the admission of new shares to the main market of the London Stock Exchange will take place this month and raise around £920 million in the process.
Cornerstone investors including BlackRock and Henderson Global Investors have already subscribed for £565 million under the IPO, after which there will be a free float of at least 20% of the company's shares. More details will be disclosed in the forthcoming IPO prospectus.
In the space of 15 years, The Hut Group has become one of the world’s largest online health and lifestyle retailers. Its nutrition and wellbeing products include the Myprotein brand, while the beauty division has seven owned brands across skincare, haircare and cosmetics, plus many more third-party brands sold through a network of websites. Other interests include the Hale Country Club in Altrincham and Manchester's King Street Townhouse Hotel.
The business is 20% owned by founder Matt Moulding, who is reportedly set to be awarded shares worth about £700 million under an incentive scheme if the company's valuation reaches £7.25 billion over the next two years.
Book some shares in Airbnb
In the United States, the most eagerly awaited IPO in the pipeline is Airbnb. The San Francisco-based company is thought to be targeting a listing by the end of the year, having already filed confidential IPO registration documents with US regulators.
Its original flotation plans were disrupted by the pandemic, but with many travellers shunning hotels due to the coronavirus, Airbnb has seen a surge in demand after more than one million nights were booked in a single day in July for the first time since March.
Driven by a successful technology platform and rise of the sharing economy, a total over 400 million people have used Airbnb since the business was started in 2008 by Brian Chesky, Joe Gebbia, and Nate Blecharczyk.
It was valued at $18 billion after a debt issue in April, compared with almost $30 billion at the peak of Wall Street's IPO euphoria in 2019 when the likes of Uber and Lyft were able to tap investors despite the pair's far-from-certain route to profitability.
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That trend for loss-making tech companies to pursue stock-market listings is continuing, with Airbnb reportedly in the red for 2019 and Snowflake racking up losses of US$384 million despite seeing a surge in revenues last year.
The cloud data specialist said on 24 August that it had filed a registration statement with the US Securities and Exchange Commission. The number of shares to be offered in the IPO and the price range are yet to be determined, but we do know it will trade under the ticker SNOW.
The same day saw a similar move by Unity, whose real-time 3D software supports more than half of the top 1,000 mobile games on the Apple App Store and Google Play. The platform helps game developers — from the largest publishers to individual creators — to build and operate high quality games.
Unity's revenues jumped 42% to $541.8 million last year but it still made a loss of $54.1 million in the first six months of this year.
Workplace project management app Asana also unveiled its plans on 24 August, but is likely to pursue a direct listing in order to enable existing investors to monetise their shares.
This alternative to the usual public offering of shares has already been used by streaming business Spotify Technology (NYSE:SPOT) and communications firm Slack Technologies and is likely to be repeated by data analytics company Palantir should it pursue a listing later this year.
Other US-based stock-market listings in the pipeline include dating app Bumble, which is reportedly seeking a valuation of between $6 billion and $8 billion under an IPO scheduled to take place early next year.
In Asia, a blockbuster flotation by Chinese fintech Ant Group could raise a record $30 billion through a simultaneous listing in Hong Kong and Shanghai as early as October. The company, backed by China's e-commerce giant Alibaba (NYSE:BABA), is likely to sell up to 15% of its shares.
Your guide to buying Airbnb shares with ii
Early investment in Airbnb is not available to UK retail investors but you will be able to buy shares through ii on the first day they start trading.
Here are the steps you can take in advance to be ready for day 1:
1. Open an account
You will be able to hold shares in our Trading Account, SIPP, ISA and Junior ISA.
2. Complete the exchange agreements
You need to complete this form before you make your first international trade. We will prompt you to complete the agreements the first time you search for an international share price.
3. Complete a United States dealing (W-8) form
Before you can buy US-listed shares you need to have completed a W-8 form. You can find the form, and instructions for sending it back to us, on our Useful Forms page. You don't need to do this if you are only investing in a SIPP.
On the day shares are admitted there will be an initial period of price stabilisation, after which trading commences. This may only be a few minutes but can take a few hours, as was the case with Alibaba (NYSE:BABA) when it floated in 2014.
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