Global IPO activity has fallen sharply in Q3 2011, according to Ernst & Young’s Q3 Global IPO update.
In Q3’ 11, a total of 284 deals raised US$28.5b, compared with 383 deals worth US$65.6b for Q2’11 (a 26% decrease in number and 57% drop in capital raised).
In Q3’10, a total of 302 IPOs raising US$52.5b, a 6% decrease in number and 46% in capital raised compared to Q3’11. There were only 3 deals raising over US$1 billion in this quarter globally. The global average deal size was US$100m in Q3’11, compared to US$171m in Q2’11.
Twenty-two IPOs have been postponed and 49 withdrawn in Q3’11– there were 20 and 76 respectively for Q2’11, according to Dealogic. This is mainly due to market volatility. However, approximately 9 out of 10 global IPOs1 were priced within or above their initial filing range in Q3’11 – this is similar to Q2’11 and Q1’11.
“The Q3’11 results show that the Eurozone and US debt crisis have had a deep impact on the global IPO market and on both issuers’ and investors’ confidence," says Terence Ho, Greater China Strategic Growth Markets Leader for Ernst & Young.
"There are, however, many very good businesses still waiting to go public. IPOs are still considered by companies as a way of raising capital. They are waiting for market conditions to improve, while continuing to prepare for their IPOs.”
Asia Losing Momentum
Asian issuers continue to dominate IPO activities in Q3’11 with 138 deals, which raised US$13.5b in total (47% of global funds raised). However, this is the lowest level of capital raised by Asian issusers since Q2’09 (US$3.0b in 44 deals).
European issuers completed 69 deals which raised US$8.8b (31% of global funds raised), significantly less than Q2’11 (US$21.7b in 96 deals) while remaining higher than Q1’11 with US$2.4b raised in 52 deals.
North American issuers raised US$4.5b in 41 deals (16% of global funds raised) compared with US$11.6b raised with 55 deals in Q2’11 (18%).
IPOs by Stock Exchanges
The top exchange by funds raised in Q3’11 was the Shenzhen Stock Exchange (SME and ChiNext) (US$5.5b, 56 deals).
The second exchange was the Bolsa de Madrid (US$5.3b, 5 deals). This was mainly due to this year’s third largest and this quarter’s largest IPO of Spanish Commercial Bank, Bankia, which raised US$4.4b. The third exchange by capital raised was the Shanghai Stock Exchange (US$3.1b, 9 deals).
By funds raised, the top three sectors remained financials (US$6.8b from 16 deals), materials (US$5.8b from 72 deals) and industrials (US$4.3b from 48 deals). “Although these three sectors remain robust, we are waiting for many private-equity backed IPOs in the US pipeline, especially in the technology sector,” says Ho.
“Asia will continue to lead global IPO activity as domestic and foreign IPO pipeline builds. As soon as the market stabilizes, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally,” says Ho.
The dominant trend in Europe’s IPO markets will continue to be state-owned enterprises, notes Ho.
"We have seen recently examples of European countries taking SOEs public. Governments need to act quickly to help lower market volatility and restore investor confidence for the IPO market to recover."
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