WE Soda’s decision to withdraw its $7.5bn London IPO deals another blow to the City

WE Soda has decided to abandon its plans for a $7.5 billion initial public offering (IPO) in London, delivering another blow to the city’s struggling equities capital markets. The UK-based company, which is the world’s largest producer of natural soda ash, cited “extreme investor caution in London” as the reason for its decision. The company’s CEO, Alasdair Warren, acknowledged that investors, particularly in the UK, remain cautious about the IPO market.

WE Soda, which had intended to become a major player in London’s capital market, cancelled its IPO after realizing that the market was willing to pay approximately 30% less than its desired valuation. The cancellation is a setback for the company, which had anticipated joining the FTSE 100 index.

Soda ash, a key component in various industrial processes, is used in the production of items such as glass, batteries, and detergents.

The failure of WE Soda’s IPO is the latest setback for London’s equities market, which has struggled to attract significant listings in recent years. Only four London listings took place in the first quarter of this year, raising a mere £81 million. London has also experienced the withdrawal of listings by other large industrial companies due to turbulent market conditions.

The collapse of the WE Soda listing is a blow to Rishi Sunak’s efforts to enhance London’s appeal as a destination for major IPOs. Nonetheless, government officials maintain that the decision does not severely impact the city’s reputation, as low issuance has been observed in many major markets in recent months.

Despite offering over $500 million in dividends, investors were unwilling to meet the price that WE Soda was seeking. A banker involved in the process mentioned that while the transaction was possible, it was not at a price level that the company was willing to accept. The IPO market remains challenging.

Warren revealed that WE Soda had encountered three challenges with investors: unfavorable IPO market conditions, limited understanding of the soda ash industry, and skepticism about the sustainability of its profit margins in the future.

In response to the news, City minister Andrew Griffith highlighted the ongoing efforts to attract innovative and large companies to the UK’s capital markets. The UK is implementing reforms to build on its success as Europe’s leading investment hub.

Additional reporting by Jim Pickard