Global IPO activity falls to lowest level since Q2’09

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29 March 2012 – Global IPO activity has fallen sharply in Q1 2012, according to EY’s Global IPO update. So far this quarter, a total of 157 deals has raised only US$14.3b, down by 69% by capital raised (US$46.6b in 296 deals), compared to the same period last year. This is the lowest quarter on record since Q2 2009 when there were 82 IPOs worth US$10.4b.

Globally, this quarter was the first time that just one deal raised above US$1b since Q1’09 when no IPOs exceeded US$1b. Average deal size decreased to US$91m compared to US$157m in Q1’11, a 42% drop. Seven IPOs have been postponed and 36 withdrawn in Q1 2012, compared to 5 and 53 respectively for Q1’11. In terms of pricing, 81% of global IPOs in the quarter priced within or above their initial filing range, while just 7% of IPOs were priced above their initial filling range

Marc Guns, partner at EY comments: “Despite difficult current market conditions, there are a number of positive signs of fundraising activity worldwide. Companies are no longer simply listing on their national market by default. 2012 is already seeing more cross-border activity, with companies from all regions listing on exchanges like Hong Kong, London and the US.”

A slower start of the year in Asian exchanges
Despite a tough start of the year, Hong Kong, Shenzhen and Shanghai stock exchange were yet again among the top five global markets ranked by capital raised. Out of the top 20 global IPOs this quarter, 8 were listed on Asian stock exchanges, and IPO activity in those markets accounted for 47% of global IPO funds raised in Q1’12, with 84 deals completed, raising US$6.7b. However, Asia experienced a 74% drop in capital raised, compared to Q1’11 (155 deals which raised US$25.9b). The largest Asian IPO in Q1 was the US$794m listing of China Communications Construction Co on Shanghai stock exchanges. 

Marc Guns says: “Greater China remains an attractive destination to companies from the developed markets in the consumer products, industrial (e.g., infrastructure), materials (e.g., metals and mining) and technology sectors. In addition, as the Shanghai stock exchange fully opens to overseas investors in the near future, we will see an abundance of foreign companies listing in mainland China as well as Hong Kong.”

US: technology companies to show the way
Technology IPOs are continuing to drive the US IPO market. Of the 32 IPOs completed on U.S stock exchanges, which raised US$ 4.8b, 11 were technology IPOs, which raised US$1.1b or roughly 34% by number of deals, reflecting the US’ growing dependence on the products and services provided by technology companies. Maria continues: “The average market value for US technology companies at the time of their IPO was double the average market value, compared to companies from other sectors. Also, interesting to note that these companies tended to sell smaller percentages of their shares (typically 10%-15%); we expect to see other sectors looking into that IPO strategy in 2012.”

Continued volatility in Europe in 2012
In Q1’12, European stock exchanges raised US$2.5b in 24 IPOs (18% of global capital raised this quarter), due to hosting two of this quarter’s largest IPOs, of Dutch cable operator Ziggo, which listed on NYSE Euronext Amsterdam for US$1.1b and Swiss market expansion services group, DKSH Holding Ltd’s US$897m listing on Swiss Exchange. “The largest deal this quarter demonstrates that as we move further into 2012, there is a greater confidence in the capital market and the trend is slowly shifting towards companies floating a smaller percentage of their equity,” continues Marc Guns.