Mid-cap tech rebound boosts this year’s IPOs

Our City reporter says strong performance from the FTSE 250 has bolstered 2021 listings across a range of industries.

The end-of-year verdict on London's 2021 IPOs is looking more favourable after Moonpig (LSE:MOON) and Trustpilot (LSE:TRST) joined a big rebound for tech stocks in the FTSE 250 index today.

Greetings cards firm Moonpig is back at February's float price after jumping 7% to 350p, and Trustpilot is up 6%, extending the customer review site's gains since its March IPO to 23%.

Bootmaker Dr Martens (LSE:DOCS) also took a big step from the level of its 370p-a-share £3.7 billion flotation in January, improving 21.8p to 410.4p. Others on the FTSE 250 index risers board includedAuction Technology Group (LSE:ATG), which listed at 600p in February and is now at 1,500p, as the stand-out performance by the crop of new entrants in 2021.

Deliveroo (LSE:ROO) has been one of the biggest IPO disappointments of the year so far after listing at 390p in late March, falling to a record low of 218p at one point in trading yesterday. Sentiment towards the food delivery firm has taken a fresh blow on fears that draft labour rules due to be published this week by the European Commission will push up pay rates across the gig economy. The stock recovered some lost ground today, but is still only valued at £4.2 billion compared with £7.85 billion at the time of the stock market listing.

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Hut Group business THG (LSE:THG), which has fallen sharply since its listing in 2020, also got some much-needed support today as shares rallied off record lows by adding 4% or 7.3p to 180p. The stock was at 800p at the start of the year, and 684p as recently as September.

The appetite for tech stocks reflected a market-wide relief rally on hopes that the impact of the Omicron variant won't be as severe as the City expected just over a fortnight ago. Whereas the FTSE 100 index is back where it was prior to the sell-off, the domestic-focused FTSE 250 still has another 50 points to go after climbing 1.5% or 348.42 to 23,229.

The session also included a return to form for digital publisher Future (LSE:FUTR) as its shares jumped 5%, and there was a similar-sized improvement for industrial threads manufacturer Coats (LSE:COA).

In terms of FTSE 250 companies reporting today, PageGroup (LSE:PAGE) shares surged 5% after the recruitment firm said revenues picked up pace in November to match the strong September. The company, which hosts a capital markets day on Thursday, now expects full-year profits to be in the region of £165 million compared with the current City consensus of £156 million.

UBS said it remains unclear how much of the strong growth reflects pent-up demand versus structural trends, but predicts a low-single digit percentage upgrade to 2022 expectations.  Shares rose 27.5p to 680.5p, which is still short of the 800p target held by analysts at Jefferies. Today's update also helped FTSE 250-listed rival Hays (LSE:HAS) to improve 2.3p to 152.2p.

Other risers included Paragon Banking Group (LSE:PAG), with the buy-to-let specialist up 5p to 544p after posting better-than-expected full-year results and highlighting an improved 2022 outlook. Paragon's aggregate new lending now comfortably exceeds pre-pandemic levels at over £2.6 billion, while it made strides on the funding side by growing retail deposits by 18.4% last year.

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Underlying profits increased by 62% to £194.2 million and the company declared a final dividend of 18.9p a share for payment on 4 March, compared with 14.4p the year before. It is also buying back shares worth up to £50 million, on top of £40 million pledged in the summer.

Chief executive Nigel Terrington said: “We enter 2022 with strong pipelines at near record levels, improved margins and the capital to continue to invest in and grow our business.”

UBS analysts have a price target of 615p, noting that Paragon is attractively valued on 9.4 times 2022 earnings. They added: “We expect Paragon to produce a steady increase in margins, good volumes and solid double-digit returns on tangible equity, and see good capital return prospects.”