Cashing in on the IPO frenzy
David Prosser explains how investment trusts can offer early access to IPOs.
Have you come across Bending Spoons? If not, don’t worry too much – the Italian technology company, which listed on the Nasdaq stock market in the US last week, is hardly a household name, though it does own brands such as internet pioneer AOL, video hosting service Vimeo and events platform Eventbrite, with which you may be more familiar.
Bending Spoons’ initial public offering (IPO) valued the company at around $18.4bn, which looks pretty generous. The company last raised money less than a year ago, in a round that suggested the business was worth only $11bn, so it’s been on quite the journey.
The structure of an investment trust works particularly well when it comes to owning private companies.
David Prosser
The lofty valuation is especially good news if you’re an investor in a collective fund that owns a stake in the company. Two investment trusts in particular – Baillie Gifford European Growth and Schiehallion – have significant holdings in Bending Spoons and have therefore enjoyed their own share price jumps in recent days.
The Bending Spoons sale also underlines the buoyancy of the IPO market. The very high-profile IPOs of recent months – most obviously the incredible story of SpaceX – are only part of the story. Alongside these blockbuster new issues, a great number of less well-known businesses are coming to market.
Indeed, the first half of the year saw global IPOs totalling $191bn according to KPMG, three times as much as during the same period of last year. Europe was an important part of the story. PwC says European IPO proceeds rose 76% during the first six months of the year.
Quite a bit of that reflects the pent-up supply of IPO candidates. Significant numbers of companies had planned to launch IPOs in 2025 but pulled back following the uncertainties caused by the Trump administration’s announcement of global trade tariffs. Now they’ve decided to go for it.
Investment banks predict the second half of the year will see a continuation of elevated activity in the IPO market – and not just from the big names in the technology sector, where businesses such as Anthropic and OpenAI are rumoured to be close to announcing their stock market listings. A wide range of businesses in multiple industries are expected to participate.
How, then, do investors get exposure to this potentially lucrative trend? The answer lies in the type of funds that have just reaped the rewards of the Bending Spoons IPO. Investment trusts can be a good place to look for exposure to forthcoming IPOs – in sectors such as Private Equity and Growth Capital, but also more broadly. Baillie Gifford European Growth, for example, is in the AIC’s Europe sector.
The structure of an investment trust works particularly well when it comes to owning private companies. Funds are closed-ended, with a fixed pool of assets; investors secure exposure to this pool by buying the trust’s shares, rather than investing in the pool direct. That means the manager doesn’t have to worry about money flowing in and out of the fund the whole time; this is particularly important because holdings in private companies are intended as long-term investments and can be hard to sell.
That’s not to say open-ended companies never invest in private companies, but their opportunities to do so are more limited. Their managers may also have to take precautions such as holding more cash, which can undermine overall portfolio returns.
In the current environment, of course, there can be no certainty about what the second half of the year has in store. Geopolitical uncertainty could yet derail the IPO boom; a deterioration of the situation in the Middle East, for example, would certainly give pause for thought.
Still, for now at least, the new issues trend is continuing. And investment trusts offer a way to exploit it.
