IPO activity continues to slow with just 50 IPOs worldwide in Q1 2009 - Ernst & Young - Croatia

Zagreb, 7 April 2009 — Global IPO activity continues to stall, according to Ernst & Young’s first quarter Global IPO update. A total of 50 IPOs worldwide raised just US$1.4 billion in capital between 1 January and 31 March 2009. Only two deals raised over US$100 million. This compares with 78 IPOs worth US$2.6 billion the prior quarter. IPO activity has fallen sharply year-on-year. In Q1 2008, 251 IPOs raised US$41.2 billion in capital (this included the VISA IPO US$19.7 billion, which was the largest US IPO in history).

The top three IPOs by capital raised were US consumer staples company Mead Johnson Nutrition which raised US$828.00 million on the New York Stock Exchange; Chinese company Real Gold Mining Ltd (US$133.01 million, Hong Kong Stock Exchange); and Saudi company Etihad Atheeb Telecommunication Company (US$79.95 million, Riyadh Stock Exchange). Together these accounted for 75% of capital raised during Q1.

The deal threshold required to make the top 20 IPO list has fallen significantly over the past year: US$6.84 million compared with US$126.9 million in Q1 2008. The difference between the threshold values for the top ten is even more marked, falling from US$416.5 million in Q1 2008 to US$10.11 million in Q1 2009.

By number of deals, the most active countries this quarter were South Korea (8 IPOs); Japan (7) and Poland (6). Emerging markets accounted for 34 of the 50 global IPOs. As a region, the Far East¹ accounted for 31 IPOs. This pattern was also reflected in the top 20 listings. 15 of the top 20 IPOs by value are domiciled in the Far East, predominantly China, Japan and South Korea.

Data from Dealogic shows that 37 IPOs have been postponed or withdrawn Q1 2009, this follows 85 the prior quarter. The decline may be due to lower levels of filings in recent months. However, the 2009 IPO pipeline remains robust.

Cord Stümke, Senior Manager in Transaction Advisory Services at Ernst & Young, comments: “The first quarter results show that the global financial crisis has had a deep impact on the IPO market and the timeframe for recovery will be much longer than people initially thought a year ago. There are, however, many quality companies from both developed and emerging markets, which have delayed or deferred their public listings. These companies continue to ready themselves to go public while waiting for market conditions to stabilize.”

The leading sectors by number of deals were Industrials (9 IPOs); High Technology (7) and Materials (7). Due to the low value of funds raised, the top three sectors by capital raised mirror the top three IPOs. Consumer Staples (US$843.1 million), Metals, Mining and Paper (US$162.2 million), and Telecoms (US$144.7 million) accounted for 83% of total capital raised.

By funds raised, the top three exchanges in Q1 were the New York Stock Exchange which despite only 2 IPOs (Mead Johnson and a US$1.9 million Chinese listing) accounted for 59.76% of capital raised (US$829.9 million); Hong Kong Stock Exchange (14.51%, 6 IPOs raised US$201.4 million); and the Tokyo Stock Exchange (3.14%, 2 IPOs raised US$43.6 million).

Cord Stümke, concludes: “Past recessions have shown that successful companies often emerge from the toughest times. The recovery of the IPO market will require at least two to three quarters of macroeconomic stability and for confidence to be re-built. However when the markets open and valuations improve, high quality companies will be poised to take advantage.”

Ernst & Young’s Global IPO trends report 2009 will be available at ey.com from mid-April.

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¹ South Korea (8); Japan (7), China (5) and Hong Kong (4), Thailand (5), Singapore (1), Vietnam (1),