After a slow start to 2012, momentum lifted in the second quarter, but significant macroeconomic volatility and changes in political leadership in many parts of the world, weighed on global IPO activity for the remainder of the year.
In the year to date, the amount of capital raised globally is down by 30% at US$118.5b. The number of deals is also down by 37% (768 IPOs), compared to full year 2011 (1,225 deals, US$170b).
However, another 50 companies, with a combined deal value of around US$6.0b are expected to list by the end of December, according to Ernst & Young’s Year-end Global IPO update.
“The weakening economy, unstable equity market conditions and poor performances on some IPO transactions undoubtedly impacted investors’ confidence,” says Maria Pinelli, Ernst & Young’s Global Vice Chair Strategic Growth Markets.
This quarter, the US markets raised US$7.3b (29 IPOs), narrowing the lead on the Asian markets, which raised US$8.8b (59 IPOs).
European exchanges also saw something of a return to form, with deal value reaching US$7.0b (20 IPOs).
Globally, year-on-year, the picture for Q4 remains somewhat depressed. The number of deals fell 46% from 255 deals in Q4 2011 to 136 deals in Q4 2012, whereas by capital raised, it only fell 6% from US$29.1b in the same period last year to US$27.3b this quarter.
“As expected, there has been lower IPO activity in Asia as the number of state owned enterprises (SOEs) coming to market has diminished," says Pinelli. "The fourth quarter figures show that the US IPO market is back by deal number and rewarding companies that perform strongly. Europe has significantly increased activity in the fourth quarter, compared to the rest of the year.”
Most active sectors in 2012
The leading sectors by capital raised in 2012 were technology (US$23.2b via 112 deals), financials (US$18.0b via 46 deals) and industrials (US$17.2b via 112 deals).
Energy and materials sectors also stood out by capital raised (ranked 4th and 5th). Pipeline data suggests these sectors should continue to drive activity in 2013.
“Looking ahead to 2013, we believe that the real estate sector is also set to be more active, due to increased investor interest ahead of a possible rebound in this sector. Oil and gas also looks set to become a more dynamic sector in the US and Europe. Other sectors to watch include infrastructure and healthcare, where investment is expected to occur,” comments Pinelli.
US stock exchanges ahead of Asia
The NYSE and NASDAQ exchanges raised US$44.9b in 128 deals, and NYSE raised 19% of global proceeds in 2012; leading the Shenzhen, Hong Kong and Shanghai stock exchanges (US$11.1b via 129 deals, US$9.8b via 44 deals, US$5.3b via 25 deals respectively) for a second consecutive year.
Pinelli says: “Market and investor confidence is building, the employment picture is improving and the housing market is seeing a return to form. Despite exceptional weather conditions, political uncertainty, a closed market for several days and concerns over the impact of the fiscal cliff, the US market is active.
“We are continuing to see companies sell smaller stakes (10% to 20%) for a longer term financing strategy, with the view to raise further capital with one or two follow-on offerings. We believe that Q1 2013 will start cautious, but we anticipate that by June 2013 we will be looking at a higher level of activity in the US and a strong pipeline of deals coming to market.”
Greater China IPO market taking a pause
Activity in Greater China in 2012 tailed off as the three-year run of sales of large (SOEs) came to an end.
“The after-market in Greater China in particular has been depressed and across Asia investment confidence is weak with investors holding back” says Pinelli. “Although the Greater China market has seen signs of improvement in the past week – thanks to the People’s Insurance Co of China Ltd. raising US$3.1b, (the largest deal on HKEx this year) – Chinese and foreign companies into China are currently finding it difficult to complete their IPOs, as investors are showing signs of scepticism in this market.”
The Asian exchanges only completed 373 deals which raised US$47b, down 46% by capital raised compared to 2011 (610 IPOs, raising US$88b). Other active stock exchanges included, Bursa Malaysia, raising US$7.6b with three of the year top 20 deals, the HKEx (US$9.8b in 44 deals), and the Shanghai and Shenzhen Stock Exchanges (SME and ChiNext), raised US$16.4b in 154 deals in total.
European stock exchanges started picking-up
European exchanges saw a 63% decline in capital raised (US$11.1b raised in 139 IPOs) in the first 11 months of 2012, compared to 2011 full year (US$29.7 raised in 266 deals). However, the top three largest European IPOs so far this year all happened in Q4 2012. The London Stock Exchange raised the most capital (US$3.9b in 7 deals) with 57% of capital raised coming from Russian issuers. Deutsche Börse AG ranked second (US$2.4b in 11 deals) and Euronext ranked third (US$1.5b in 9 deals).
“Looking ahead to 2013, we expect a better outlook, with a strengthening US economy leading the recovery, followed in the latter half of the year by Europe and Asia. Reduced stock market volatility, assertive action from central banks and brighter economic prospects suggest 2013 could be the right time for companies currently in the pipeline to list," says Pinelli.