Rishi Sunak’s Budget could turbocharge UK’s IPO market

The Chancellor may have good news for IPO's as new float Virgin Wines jumps and Trustpilot flags listing.

A strong debut for Virgin Wines and Trustpilot's £1 billion float plan today kept the new listings market fizzing ahead of a potentially big announcement from Rishi Sunak on tech IPOs.

The Chancellor's Budget statement tomorrow is reportedly set to feature a shake-up of listing rules so that “the most successful and innovative companies” list on the UK market.

Sunak's review, which has been chaired by former EU financial services commissioner Lord Hill, is likely to consider the role of dual class share structures so that technology entrepreneurs are able to retain a degree of control over the businesses they founded.

Admitting shares without equal voting rights impinges upon shareholders rights, however, potentially leading to corporate governance concerns. Lord Hill has also reviewed the current 25% free float limit and whether unduly strict or inflexible track record requirements deter some companies from listing.

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Barriers to secondary listings in the UK have also been considered in an effort to improve access for small UK investors, who may otherwise not be able to consider overseas-based stocks.

Sunak commissioned the review in November at a time of growing concern about the paltry number of tech listings in London compared with Wall Street, where Airbnb (NASDAQ:ABNB) and DoorDash (NYSE:DASH) were among high-profile debutants at the end of last year.

London's biggest float of 2020 was Hut Group owner THG (LSE:THG), which the London Stock Exchange called a “case study for tech in London” after its initial valuation of £5.4 billion. The shares were priced at 500p but now trade at 724p for a market cap of almost £7 billion.

THG isn't currently eligible for the FTSE 100 index, however, as founder Matt Moulding has a golden share that allows him to reject a hostile takeover. This means the company is only able to use the standard segment of the market, whereas in the United States dual class shares are not a barrier to the higher echelons of the stock market.

The performance of Hut Group has encouraged others to follow suit, with online greetings card business Moonpig (LSE:MOON) and Dr. Martens (LSE:DOCS) making strong starts to stock market life in recent weeks.

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As both high-profile flotations excluded retail investors, Sunak is also under pressure to ensure that small shareholders are given a seat at the table as IPOs take off in 2021.

Should you put your faith in Trustpilot IPO?

The next big IPO in the pipeline is Copenhagen-based Trustpilot, which yesterday confirmed its intention to float in a move that could value the business review platform at £1 billion. It launched in 2007 and now employs 750 people in eight offices, including London, New York and Berlin.

A flotation would be a profitable move for AIM-listed venture capital firm Draper Esprit (LSE:GROW), having supported the company through various funding rounds since 2013. Draper’s interim results in November showed Trustpilot as its biggest investment after a valuation gain of £15.6 million over the period to £80.9 million by the end of September.

Restaurant and grocery delivery business Deliveroo is poised to follow Trustpilot's lead, with plans for a potential £5 billion stock market listing reportedly due to be announced next week.

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The mood around new listings was given a further boost today when Virgin Wines rose 15% to 226p in its first session on AIM. The online wine delivery business was valued at £110 million on debut after it placed 6.6 million new shares in a move raising £13 million for the company. A further 17.7 million shares worth £35 million were sold by existing shareholders.