What’s next for UK IPOs in 2025?

It’s been a lacklustre few years for the global initial public offering (IPO) market.

Although the rate of IPOs picked up in 2024, for the first three quarters of 2024, there were 946 IPOs. This is well below the peak of IPO activity in 2021, when there were 2,355 IPOs in the first three quarters of the year.

The situation in the UK has been even worse, with a number of high-profile companies planning to leave the UK for the US.

However, as we reach the cusp of the new year, there are some encouraging signs that IPO activity in the UK could pick up in the coming months.

This article isn’t personal advice. Remember, investments can rise and fall in value, so you could get back less than you invest. If you’re not sure if an investment’s right for you, ask for financial advice.

Will 2025 be a turning point for the UK stock market?

Companies including Shein, Ebury, Canopius, Zilch Technology, EToro, and Starling bank, have all shown an interest in potentially listing on the London Stock Exchange.

Added to this, after the breakup of Vivendi, the French media conglomerate, Canal+, one of its main brands, listed in London in mid-December.

The company has 27 million paid subscribers and listed with a valuation of £2.5bn. This was significantly lower than expected, which suggests the UK still has issues with IPOs, even if London is able to attract new listings.

Canal +s unlikely to be included in the FTSE indices because it’s headquartered in France, however, if it does move its HQ to London, then it would be close to qualifying for inclusion on the FTSE 250.

A strong IPO pipeline is traditionally considered a sign of a healthy market, so if these companies do list in the coming months, this could be a turning point for the London IPO market.

Is the lure of the US stock market damaging UK IPOs?

Ashtead Group has announced it plans to move its primary stock market listing to the US, which is where the company generates 98% of its revenue. The company is still expected to maintain a secondary listing in the UK though.

Flutter Entertainment and CRH, the building company, have both moved their primary listings to the US in recent months.

The US has been an attractive option for some British companies due to its superior valuations. Analysts expect the price-to-earnings (PE) ratio of the FTSE 100 to be just over 11 times in 2025 – this is half the PE expected for the S&P 500.

Narrowing the valuation gap with the US is crucial for the UK market’s attractiveness on the world stage.

Changing FCA rules could boost attractiveness of London market

The UK authorities are aware of this problem and are taking steps to address it.

For example, in July, the financial conduct authority changed the listing regime for London markets, which was the biggest shake up for 30 years.

One of the biggest changes was removing the need for votes on transactions. Another key change was new rules that will offer flexibility around enhanced voting rights, for example for owners and founders.

The listing process has been simplified with less onerous requirements now needed to meet the eligibility requirements to list in London.

The FCA has said that this better aligns the UK’s regime with international standards.

So, 2025 is considered a big test of the new rules to see if they boost the attractiveness of the London market, and stop the flow of companies moving to the US.

The changes to the FCA rules have also smoothed the path for Chinese fast fashion retailer Shein, to list in the UK. It’s rumoured to list at some point in 2025, and it could generate a valuation of up to $60bn.

This highlights another emerging theme in the IPO market – cross-border listings.

EY reports that since 2023, over half of IPOs on US exchanges have been from foreign-domiciled companies, which is the highest level in 20 years.

More cross-border listings is good news for investors as it can make it easier to get a regionally diversified portfolio.

However, a risk to foreign listings on US exchanges in 2025 comes from Donald Trump and his ‘America First’ economic strategy. If the US becomes a less attractive place to list, then London could be the next choice for the world’s leading companies.

Quality over quantity

Another theme within IPO markets is the shift to quality over quantity.

Schroders found there was a near 75% drop in companies listed on the London Stock Exchange between the 1960s and the end of 2022. There’s a similar trend across the west, with a 40% drop in the number of companies listed in the US since 1996. Schroders also found fewer than 15% of US companies with revenues over $100mn are listed on the stock market.

This is not all bad news though.

This has the potential to herald a trend that could see well-established companies choose to list, rather than unicorns who have an uncertain future. Shein, Canal+ and Revolut are all well-established companies.

In the US, there’s a large cohort of scaled private tech companies that could list next year. This includes the buy now, pay later company Klarna.

The group reported a 27% increase in its first-half revenues for 2024, it also reported a SEK 1.1bn increase in profit, and the gross value of products sold that use Klarna rose above SEK 1tn.

StubHub, the ticket exchange, and resale company is also rumoured to list at some point in 2025, along with SpaceX and Stripe, which has a current valuation of $70bn.

These IPO prospects aren’t minions. They’re large, well-known companies with long track records, and a history of generating revenue.

This shift to quality in the IPO market in recent years, could help explain the slowdown in IPO activity. Investors don’t just want to invest in any old company anymore, they want quality to improve their chance of strong long-term returns.

Remember, investing in IPOs, share offers, and individual companies isn’t right for everyone. It’s a higher-risk way to invest your money. When a company first lists on the stock market, its share price can rise and fall quickly. If the company fails, you could lose your whole investment.

You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio. If you’re not sure if an investment’s right for you, ask for personal financial advice.

Kathleen Brooks is the Founder of Minerva Analysis, a market analysis company. Hargreaves Lansdown may not share the views of the author.