Member Article

FTSE 100 pitted to the post by IPOs

Companies in the FTSE 100 were outperformed in the past two years by companies floated on London’s main market, according to business advisory firm, Deloitte.

The share prices of 10 main market trading company IPO,s launched in 2011 and 2012, increased by an average 19.2%, while the FTSE 100 rose by just 8.8%.

According to Deloitte’s IPO barometer, these figures represent a major turnaround from 2010, when the 12 main market entrants share price growth was 41.4% lower than the FTSE 100.

This previous trend was attributed to weakness and uncertainty in the Eurozone, however this doesn’t seem to be the case in more recent years.

Deloitte said optimism has returned to capital markets this year, while in December the FTSE 100 passed the 6,000 mark for the first time since July 2011.

Tim Grogan, capital markets senior manager at Deloitte in the North West, said: “We believe the region will see increased IPO activity this year as there is a strong pipeline of businesses preparing themselves for an IPO, particularly on to AIM.

“Banks can only lend so much and for companies looking to raise capital, the markets are again becoming an increasingly attractive option.”

“There is a misconception that IPOs are a bad investment and that it is better to keep your money in already listed stocks. 2010’s results perpetuated this view.

“Our analysis shows that the picture is changing as recent IPOs have performed 11% better than the FTSE.

“This is a striking differential and shows that IPO valuations are now being set at a level where investors can make a superior return.

“Together with a rising FTSE and reduced volatility, there is a far more positive backdrop for the IPO market in 2013.”

This was posted in Bdaily's Members' News section by Miranda Dobson .