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Record £82.5bn raised on LSE despite plunge in new floats

posted Dec 29, 2009, 11:42 PM by Yale ReiSoleil
By Martin Flanagan

London (The Scotsman) -- A RECORD £82.5 billion was raised on the London Stock Exchange in 2009, but the fund-raising was driven by cash calls on existing shareholders as the number of new flotations plunged.

The overall amount raised was 16 per cent up on last year, itself a record year, but the figure masked a virtual collapse in IPOs (initial public offerings) as market conditions remained choppy for a substantial part of the year.

The number of UK and international flotations on the main LSE market slumped to just seven from 35 in 2008, while the IPO money raised crashed to £1.1bn from £6.3bn in the previous year.

It was a similar depressed flotation picture on the smaller Alternative Investment Market (Aim), where there were only 11 IPOs compared with 38 the previous year.

The amount of flotation money raised on Aim, according to the LSE data released yesterday, tumbled a third to £598m from £917m in 2008.

In 2006, before the credit crunch and subprime fallout battered stock markets, there were 89 flotations on the main LSE market and 278 on Aim.

It was a much healthier picture for rights issues by existing publicly-quoted companies this year, which rushed to repair balance sheets that had been stretched in the recession.

The amount of secondary issue money raised in 2009 rose to £76.1bn from £60.4bn in 2008, while money raised from further issues on Aim leapt to £4.6bn from £3.2bn in the previous 12 months.

Tracey Pierce, head of equity primary markets at the LSE, said that the record performance had been "despite difficult market conditions".

Pierce said: "Our markets continued to support the capital-raising needs of companies across the year, with a flow of secondary issues contributing to a record year of equity fundraising, providing firms with the backing they need to help them through testing market conditions."

Pierce added that the pipeline of new companies looking to float in 2010 was promising "although there can be no certainty regarding the timing of new issues". 

Interest in floating on the LSE had been received from a broad range of countries and sectors, she said.

Head of Aim Marcus Stuttard commented: "The fact that Aim companies succeeded in raising over £4.5bn through further issues in 2009 – capital injections which they have used to pay off debt, rebuild balance sheets and fund further growth – demonstrates how interest in small and mid-cap companies among London's unrivalled suite of small cap investors remains strong."

Among equity market highlights of the year was the £13.5bn raised by Lloyds Banking Group, the world's biggest-ever rights issue, while there were also major cash calls on investors by HSBC and Royal Bank of Scotland.

In addition, mining giant Rio Tinto raised £7.3bn, housebuilder Barratt Developments tapped shareholders for £545m and brewer Greene King, which owns Belhaven, raised £218m.