WE Soda, the world’s largest producer of natural soda ash, has pulled out of plans for a listing on the London Stock Exchange, the company confirmed this week. It would have been the biggest UK listing so far in 2023.
Alasdair Warren, CEO at WE Soda, said that: “extreme investor caution in London meant that we were unable to arrive at a valuation.”
It is a tale of woe that has been confirmed by broker sources close to The Armchair Trader who have been telling us for some months now that the IPO market in the UK is looking extremely difficult.
Some commentators also blame the high inflation rates in the UK, which are causing British investors to sit on their hands, as they remain unsure how much higher the UK cost of living will go. UK inflation rates are currently running much higher than in the Eurozone for example.
Investors are still cautious
“This is fresh blow for London just as confidence in the City as an IPO launch pad appeared to be edging back upwards,” said Susannah Streeter, head of money and markets at Hargreaves Lansdowne. “Investors are understandably cautious given the nervousness surrounding the UK’s prospects with inflation still running so hot.”
Gilt yields have soared to levels not seen for 15 years amid expectations the Bank of England will have to fire off fresh rounds of interest rate hikes. Only four companies managed to list in the UK in Q1, raising a total of £81m.
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“The uncertainty ahead is clearly off-putting and companies considering IPOs may continue to set their sights on New York instead,” Streeter said.
It is understood that the market was offering to pay around 30% less for the offering than WE Soda had originally been hoping for. According to a Financial Times report, discussions with some larger investors were also mishandled. There were also worries about the fact that management was holding zero shares in the group.
FT: generous dividend offer
WE Soda had been trying to tempt investors with a very generous dividend offer. The FT reported that there had been considerable investor interest in the IPO, with over 300 investor meetings scheduled for Warren with institutions.
The cancellation comes as something of a surprise, given Warren’s own track record in capital markets, where he has held senior jobs at Goldman Sachs and Deutsche Bank.
The loss of another marquee IPO deal raises further questions about the UK government’s post-Brexit strategy for the City of London in particular, and the wider UK financial services community.
