IPO market in 2021 led by Moonpig and Dr Martens
After a quiet 2020, there are early signs that more UK companies will float this year.
12th January 2021 13:24
by Graeme Evans from interactive investor
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After a quiet 2020, there are early signs that more UK companies will float this year.
An IPO resurgence after £1 billion-rated Moonpig joined Dr Martens in the starting blocks today provided more welcome cheer for UK investors at the start of 2021.
As well as a pick-up in big stock market floats, there's been a rare period of outperformance for the FTSE 100 index after the top flight jumped 6% during the first week of the year.
The reversal of fortunes comes after a Wall Street tech stampede in 2020, when the flow of spectacular debuts for the likes of Vroom (NASDAQ:VRM), Snowflake (NYSE:SNOW) and Airbnb (NASDAQ:ABNB) was only interrupted by September's £5.4 billion London debut of Hut Group owner THG (LSE:THG).
THG's valuation has rocketed to £7.7 billion since then, with the tech business led by Matt Moulding today enjoying a further boost with fourth-quarter trading ahead of expectations.
Shares topped 800p for the first time in the wake of the update, which included an upgrade in revenues guidance for the 2021 financial year to between 30% and 35%.
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Investor interest in the company is being driven by exposure to the fast-growing beauty and nutrition markets through online brands Lookfantastic and Myprotein, as well as the prospects for the company's high-margin e-commerce platform Ingenuity.
The London Stock Exchange (LSE:LSE) has called THG a “case-study for tech in London” as it shows that such companies no longer have to list outside Europe to achieve multi-billion valuations.
It should serve as encouragement for 2021's other potential tech IPO candidates, such as Deliveroo, Darktrace and Trustpilot, as well for the debut of greetings card company Moonpig.
The online business, which is chaired by former WH Smith (LSE:SMWH) boss Kate Swann, is targeting a premium listing on the London Stock Exchange by floating at least 25% of its shares.
Its technology platform harnesses data science and artificial intelligence tools, including for predictive insight into gifting intent among its 12.2 million active customers. The company now boasts a 60% market share in the UK, having achieved mid-teens compound revenues growth over the past decade and 20% since 2018.
Swann pointed out today that customer spend on gifts and cards is “cycle resilient”, adding that the group is well positioned to capitalise on its first mover advantage. She said: “Moonpig Group combines strong and sustained growth with excellent cash generation, in a market which is underpenetrated and moving online.”
The company, which has been private equity owned since 2016, reported underlying earnings of £44.4 million for the year to April at a margin of 26%. However, the performance in the new financial year will be significantly stronger due to the benefit of lockdown restrictions.
Moonpig's announcement of an intention to float comes a day after it emerged that private equity firm Permira is planning to list iconic footwear brand Dr Martens on the LSE's premium segment. It has been reported that the business could be valued at more than £3 billion.
Dr Martens sells in excess of 11 million pairs of footwear annually in more than 60 countries, with revenues of £672 million in the year to the end of March 2020.
The e-commerce channel has been the driving force behind its growth, although the group also sells its footwear through more than 130 own retail stores. Chief executive Kenny Wilson said: “We have invested massively to ensure that we deliver the best digital and store experiences to connect with our wearers, and through this we are driving our long term, sustainable growth.”
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