Working it Out: PureGym May Abandon Plans for IPO (again)

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By Robyn Ma​


The Story

Britain’s largest health and fitness club chain, PureGym, may be abandoning its proposed £1.5 billion stock market listing (Sky News). Back in July, the company had revealed it was exploring the option of raising money through an Initial Public Offering (IPO) for the second time. It had appointed Morgan Stanley and Barclays to lead the listing, with support from Jefferies, Royal Bank of Canada and Berenberg (Financial Times; The Guardian).

The plan was to use proceeds from the IPO to expand the fitness club’s gym offerings, and to pay off its £30 million debt (Financial Times). The easing of Covid-19 restrictions earlier this year had led to a rebounding demand for fitness clubs, with around 1.6 million people paying for PureGym’s memberships in August. Humphrey Cobbold, Chief Executive at PureGym, said the group was recovering and now wanted “to have more cash and resources available to pursue opportunities” (Financial Times). However, market volatility may be the reason behind the group’s decision to pull out of its IPO (LSE).

What It Means For Businesses and Law Firms

During the first three quarters of 2021, the UK has had the highest number of IPOs since 2014 - with £13.7 billion raised. However, there may be signs that the IPO market is cooling down. Several UK companies have pulled out of public listings recently, as investors fear a potential “winter lockdown and inflationary cost pressures” (Financial Times). Some of the IPOs that went ahead this year haven’t performed as well as anticipated. Shares of The Hut Group have dropped more than 60% since its listing in September (Yahoo). Meanwhile, Deliveroo suffered a “disastrous public market debut earlier this year, with shares slumping 30% on the first day of trade” (Yahoo).

Although the FTSE 100 recovered from its lockdown losses, is this enough to put investors at ease? Susannah Street, senior investment and markets analyst at Hargreaves Lansdown, noted that “with interest rates forecast to rise, a higher yield environment makes the future cash flows of growth stocks less attractive” (Yahoo). In other words, investors are worried about the future growth of new listings.

Uncertainty regarding the recovery of various industries is another concern. London-based steak chain Hawksmoor has shelved its plans for an IPO due to unease within the hospitality industry, related to labour shortages and supply chain disruption as a result of Brexit.

When listing on a stock exchange, companies heavily rely on law firms to comply with the strict listing requirements, conduct due diligence, draft contracts and prospectuses, and liaise with sponsors, underwriters, and governmental authorities.

Law Firms Involved: Back in 2017, Latham & Watkins advised private equity firm Leonard Green on its acquisition of PureGym, while Ropes & Gray advised PureGym. Travers Smith acted for PureGym's management team.