IPOs to watch out for in 2022

5th January 2022 09:30

by Graeme Evans from interactive investor

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The past 12 months has been a whirlwind for stock market flotations, but what’s in store for 2022? We take a close look at a handful of the most exciting new listings.

The buoyant IPO conditions of 2021 are unlikely to be repeated in 2022 as companies looking to go public come to terms with a much more exacting climate.

The return of market volatility due to Omicron and worries over inflation and rising interest rates appear to have taken some of the steam out of the new listings arena.

A slowdown was perhaps inevitable, given that many IPOs were delayed by the pandemic into 2021 and then swamped by demand from investors with vast cash piles left to deploy.

Such conditions were perfect for a flurry of London listings as the likes of Dr. Martens (LSE:DOCS), Darktrace (LSE:DARK) and Oxford Nanopore (LSE:ONT) began trading with big opening day advances.

Despite the threat of IPO fatigue, analysts at Liberum think that past stock market returns still present a convincing case for companies to go down the flotation route.

The broker said recently: “Our forecasts indicate that we are only going back to the averages of 2018 and 2019 which means that the number and volume of IPOs should remain healthy.”

For now, the IPO pipeline at the start of 2022 appears to be short amid very little speculation about potential newcomers. Interest rates should be supportive for some time yet, but the prospect of rising bond yields tends to diminish the appeal of those companies built around future cash flows, such as tech-focused ventures.

And after a bruising year for Will Shu at Deliveroo (LSE:ROO) and Matt Moulding at his Hut Group business THG (LSE:THG), founder-led stock market listings might prove to be in short supply.

Recent changes to listing rules have been made in an effort to entice more entities like Deliveroo, including by allowing dual-class share structures within the London Stock Exchange's premium segment and a cut in the free float level from 25% to 10%.

The number of stocks listed in London is already in decline, with the City's profile set to receive a big blow next year when mining giant BHP (LSE:BHP) switches its primary listing to Australia. Ryanair (LSE:RYA) recently announced plans to delist in order to comply with post-Brexit airline ownership rules and Silence Therapeutics has just moved to New York.

Cambridge-based BenevolentAI, which uses big data and deep learning to help discover more effective medicines, has also opted to make its £1.3 billion debut on Euronext Amsterdam through a merger with a special purpose acquisition company (Spac).

More firms are choosing to list through these “blank cheque” deals, where shell companies raise money through IPOs before absorbing a privately owned company.

This approach is more common in the US, where digital media company BuzzFeed (NASDAQ:BZFD), social networking site Nextdoor (NYSE:KIND) and Cazoo (NYSE:CZOO) used-car business listed through Spacs. More conventional US listings in 2021 included the Robinhood (NASDAQ:HOOD) trading platform, dating app Bumble (NASDAQ:BMBL) and electric car company Rivian (NASDAQ:RIVN), which has doubled its initial $49 billion (£37 billion) valuation.

Wall Street continues to swirl with speculation about 2022's potential big name IPOs, with Silicon Valley digital payments company Stripe again in the frame. The start-up, which is believed to have a valuation of $100 billion (£75.5 billion) or more, continues to say it is happy to be private.

One of Stripe's customers is Instacart, with the delivery app seen as another potential IPO candidate having been valued at about $30 billion (£22.65 billion) last year.

The online message board site revealed on Twitter on 15 December that it had submitted a draft registration statement with the Securities and Exchange Commission (SEC) about a possible IPO.

The move comes a few weeks after it was reported to have hired investment bankers and lawyers in order to work on a potential New York listing.

A potential IPO worth $15 billion (£11.3 billion) has been mentioned, having been valued at $10 billion (£7.5 billion) in its most recent funding round. Reddit said in its Twitter post that the number of shares to be offered and the price range had yet to be determined.

The company's profile was significantly boosted last year when it became the focus of attention for retail investors trading GameStop (NYSE:GME) and other meme stocks. Chief executive Steve Huffman co-founded the business in 2005 with college friend Alexis Ohanian.

CVC

The private equity firm behind Moto service stations, Six Nations rugby and RAC roadside rescue is said to be working on a float worth more than $15 billion (£11 billion).

In early December, the Sunday Times reported that CVC had appointed investment bank Goldman Sachs with a view to a potential stock market listing.

It follows a bumper year for a sector awash with cash as investors pump record sums into funds amid low interest rates. Deals in the private equity industry have included supermarket Morrisons, temporary power firm Aggreko and the infrastructure group John Laing.

In November, CVC struck a major deal of its own when it agreed to buy tea brands including Lipton PG tips and Pukka from Unilever (LSE:ULVR) in a transaction worth 4.5 billion euros (£3.8 billion)

CVC's interest in an IPO comes a few months after mid-market specialist Bridgepoint (LSE:BPT) took the plunge with a flotation in July, valuing the business at just under £3 billion. The shares are up by about a third in one of London's most successful flotations of the year.

Databricks

Shell (LSE:RDSB), ABN AMRO (EURONEXT:ABN) and H&M (OMX:HM B) rely on Databricks as a platform for data engineering, collaborative data science, machine learning and business analytics.

They are among 5,000 users of the Silicon Valley start-up, whose cloud-based “Lakehouse” platform is served by partners including Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Capgemini (EURONEXT:CAP).

Databricks describes itself as being on a mission to simplify and democratise data and artificial intelligence in order to solve the world's toughest problems.

It was co-founded in 2013 by chief executive Ali Ghodsi, who recently oversaw a $1.6 billion (£1.2 billion) funding round that valued the business at $38 billion (£28.7 billion). Backers included Edinburgh-based Tesla (NASDAQ:TSLA) investor Baillie Gifford.

Ghodsi believes that Databricks is IPO-ready but has been unwilling to give a timeline on what has the potential to be one of Wall Street's biggest and highest-profile listings.

ByteDance

Plans for the owner of short video platform TikTok to go public with a listing in Hong Kong continue to be frustrated by regulatory hurdles in China.

There had been talk of a listing in early 2022, but the South China Morning Post reported in October that authorities in Beijing might not give the go-ahead until after the Communist Party's 20th congress in the autumn.

A crackdown on data security in China's technology sector and greater scrutiny of overseas listings on national security grounds continue to thwart listing plans.

The business, which was founded in March 2012 and launched TikTok outside mainland China in May 2017, was valued at about $180 billion (£136 billion) in a fundraising at the end of 2020. An earlier plan to list TikTok's US operations in New York also collapsed last year.

Recycling Technologies

The Swindon-based company had planned to raise £40 million through a December placing of shares, but now expects its market debut to be early in the first quarter.

Its technology, built into the RT7000 machine, processes hard-to-recycle plastic waste into a synthetic oil that can be sold back to the petrochemicals industry as a chemical feedstock to make new plastics.

The first commercial scale RT7000 is expected to be operating at Binn Eco Park in Perth and Kinross within a year of the stock market admission. Its industry and financial backers include petrochemicals giant Neste, INEOS Styrolution and the impact investor Althelia Sustainable Ocean Fund.

Adrian Griffiths, who founded the business in 2011, said the fundraising was an important step as the company works towards mass production of RT7000.

He said: “In our quest for a sustainable, low-carbon existence, we will need plastic. It is typically a lower carbon alternative than other materials in many applications and so we need to quickly build capacity to recycle it, in a way which emits the least carbon.”

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