Global IPO activity has fallen to its lowest level since 2003, according to the quarterly Global IPO update from Ernst & Young.
Global IPO activity falls to lowest level since 2003
In the third quarter of 2008, a total of 159 IPOs worldwide raised US$13.1 billion in capital. This is the lowest level of quarterly activity – by number of deals and capital raised – since the second quarter of 2003, which recorded 130 IPOs and US$6.8 billion in cumulative capital.
Compared with the previous quarter (Q2, 2008), the value of funds raised has fallen by 66% and there have been 108 fewer deals. Emerging markets followed the global trend, with IPO activity in BRIC markets falling from 71 to 40 deals this quarter, with capital raised totaling US$3.4 billion compared with US$11.2 billion the prior quarter.
Aggregate data for the first three quarters of 2008 shows that the total number of IPOs and value of funds raised (676, US$92.5 billion) has halved compared with the same period over 2007 (1388, US$185.0 billion). In addition, data from Dealogic shows that 242 IPOs have been postponed or withdrawn in 2008 to date compared with 169 during the total of 2007.
Gil Forer, Global Director of IPO initiatives at Ernst & Young, says: “In the wake of turbulent economic times, we have understandably seen IPO activity slow. However, we know from previous experience that markets do eventually recover, for example while the reasons for the internet bubble were different – recovery took around three years. And importantly the IPO pipeline remains strong, geographically diverse and of high quality. Companies that have put in the groundwork to go public are well-positioned to take advantage of an IPO once market conditions improve.”
Beth Brooke, Global Vice Chair – Public Policy, Sustainability and Stakeholder Engagement, Ernst & Young adds: “Transparency and investor confidence is the foundation of strong markets, whether reflected in the number of IPOs on newer exchanges around the world, or in the current global markets turmoil. We hope that the US rescue package, which was approved on Friday, will start the process of restoring confidence."
In the third quarter of 2008 there were five listings in London raising US$134 million, with no listings on the main market. This compares to a total of 18 listings in London in the previous quarter raising US$5.1 billion, down 97% by value raised. Of the five listings three were UK based companies, raising US$25 million on AIM.
David Wilkinson, UK IPO Leader at Ernst & Young said: “Given the uncertainty in the current environment it is not surprising that the UK figures are so low. Businesses who may have considered raising finance through an IPO in recent times have put plans on hold while they wait to see if the UK markets recover.
"There is though a strong pipeline of both domestic and overseas companies planning to float when the market becomes more receptive, but at this stage all they can do is ensure they have all their ducks in a row and are ready to go when the economic environment improves. Alternative funding sources are available for growth and for survival, but these have also become harder to access."
In terms of regional activity, Asia-Pacific led the way accounting for 60% of IPOs by number of deals and 50% of capital raised, up from 53% and 40% in the comparative period in 2007. Europe, Middle East and Africa (EMEA) accounted for 29% of IPOs and 42% of capital raised. North America accounted for the remaining 11% of volume and 8% of capital raised.
As per the prior quarter, the leading sectors were materials, industrials, and technology. Combined these three sectors (out of a total of 12) accounted for half of all IPOs and around two-thirds of capital raised. The top three IPOs by capital raised were Saudi Arabian Mining Company (materials) which raised US$2.5 billion; China South Locomotive & Rolling Stock Corp Ltd (industrials) which raised US$1.6 billion; and the Australian company BrisConnections (industrials) which raised US$1.1 billion. Of the top 20 IPOs, 14 are from emerging markets: including three from Africa and five from the Middle East. Interestingly, the deal threshold to make the top 20 has fallen significantly since 2007. In 2007, the minimum deal value required to make the group was US$1.9 billion, this quarter it was US$119 million.
The most active exchanges this quarter (by both number of deals and capital raised) were the Australian exchange (ASX), Hong Kong Stock Exchange (HKEx), and NASDAQ. By funds raised, the top three exchanges for the year to date are the New York Stock Exchange (US$24.8 billion), Hong Kong Stock Exchange (US$5.9 billion) and London Stock Exchange (US$5.5 billion).
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