London Markets: What’s to blame for lackluster IPOs? Not private equity, one analysis says


Some of the highest profile initial public offerings in London have been disappointments this year, such as delivery service Deliveroo ROO, -6.25%, Canadian semiconductor technology company Alphawave IP Group AWE, -0.84% and Prague truck payment firm WAG Payment Solutions WPS, +1.56%.

One possible culprit: private equity. The thought is that PE firms dump their losers onto the public.

Joachim Klement, strategist at U.K. broker Liberum, looked at the performance of PE-backed IPOs. It turns out they outperform — both on the first day of trading, when they see gains of 27% vs 13%, and on a three-year buy and hold basis, at 30% vs. 21%. Klement cited University of Florida data between 1980 and 2019.

“In short, leave the private equity companies alone. They know what they are doing when exiting an investment and they live and let live,” says Klement.

The FTSE 100 UKX, +0.39% edged up 0.2% in midday trade. BP BP, +2.36% shares rose 2% as Deutsche Bank upgraded the oil giant to buy from hold with a 26% increase in price target. The same bank lifted its Royal Dutch Shell RDSB, +1.92% price target by 9%, as it said the decline in oil prices is an overreaction to the omicron variant news.

“Crude inventories remain below 5 year averages, extreme upstream capex discipline persists, several OPEC members are already struggling to meet their quotas, a return of Iranian volumes is nowhere in sight, underlying global oil demand has clearly been undented by 18 months of Covid and the threat of EVs remains a post 2030 issue at the earliest,” the analysts said.

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