2010 global IPO fund raising to exceed historic peak in 2007
- Asian issuers raise the most capital ever, accounting for nearly 2/3rds of total global IPO proceeds
- 90% of listings priced within or above their initial filing range
- Q4 2010 to achieve the highest quarterly fundraising value on record
LONDON, MOSCOW, 9 December 2010 – IPO fundraising activity will set record levels globally in 2010 with funds raised likely to exceed US$300billion. Despite the fragility of economic recovery in Western markets, Asia’s economic growth story and record-breaking debuts have fuelled a strong worldwide IPO recovery. In the first 11 months of 2010, IPOs worldwide have already raised US$255.3b in 1,199 deals. By year end, total global IPO values will exceed the previous record (of US$295b raised in the global fundraising peak of 2007), according to Ernst & Young’s Year-end Global IPO Update.
The fourth quarter in 2010 will also reach the highest quarterly IPO value on record (surpassing the US$104.8b raised in Q4 2007). This record will likely be achieved, since in Q4 2010, global IPO value has already reached US$102.8b through 294 deals, and in December, 82 further deals worth a minimum of US$16.9b are currently expected.
Asian issuers raised the most capital ever
In the first 11 months of 2010, Asian issuers have raised the most capital ever, with US$164.5b raised so far (already outstripping the US$98.2b raised in Asia’s peak fundraising year of 2006). Asian issuers make up 64% of total global IPO value so far in 2010. Ranking second, North American issuers raised US$40b in 168 deals, while European issuers raised US$32.8b in 211 IPOs and the Middle East & Africa US$5b in 47 IPOs.
Gregory K. Ericksen, Global Vice Chair for Strategic Growth Markets for Ernst & Young says:
“Benefiting from relatively low interest rates in developed markets and abundant liquidity, global investors in the last 11 months have been avidly seeking exposure to the growth in Asia and other emerging markets. This trend is expected to continue.”
Profiting from China’s strong GDP growth and market liquidity, Greater China1 issuers dominated, making up over 46% of global IPO value (US$117.9b in 442 deals, a 170% increase in total values from the same time period in 2009). Except for the US, which ranked second to Greater China, the top 6 markets for fundraising were all Asian: Japan, India, South Korea, and Malaysia.
Top 3 mega IPOs made up of 25% of global funds raised in 2010
The US$22.1b mega privatization of the Agricultural Bank of China was the world’s largest IPO ever, and made up 9% of total IPO value globally this year. These proceeds surpass the US$21.9b raised by the previous IPO record holder, of another Chinese state-owned bank, ICBC.
The fourth quarter of 2010 saw both the second and third largest IPOs of the year: the US$20.5b IPO of the Asian life insurance unit, AIA Group Ltd. in Hong Kong, in a spin-off of US insurance corporation, the American International Group, and the US$18.1b privatization of US automobile manufacturer General Motors after a historic bail-out by the US government. Together, these top 3 deals made up around one quarter of the total capital raised in 2010.
Two-thirds of US listings are backed by PE and VC firms
US exchanges raised 15% of global proceeds, or a total of US$39.5 billion in 143 deals. This represents a 58% increase in value from the same period in 2009. PE and VC sponsored deals made up 68% of US new issuances, with 75 deals worth US$13.2 billion.
European fundraising surges 526%, led by Poland and UK
In Europe so far, the first 11 months of 2010 saw a massive 526% increase in capital raised from the same time period in 2009. Despite market volatility exacerbated by the euro zone sovereign debt crisis, European exchanges launched 223 IPOs worth US$32b. Polish exchanges launched the second highest number of IPOs globally with 81 deals worth US$4.8b. UK exchanges led Europe in fundraising with US$10.1b raised in 50 offerings.
Price-challenged sponsor-backed IPOs make a comeback
“Under pressure to release capital to investors and with limited access to credit, PE firms looked to public markets as an exit option, often accepting discounted valuations,” says Ericksen. Globally, PE firms exited 139 companies via IPO, raising around US$33.1b or (12.9% of total funds raised), while VC backed firms exited 102 companies through an IPO, worth US$10.7b (4.2%). The largest PE-backed IPO was Denmark’s jewellery manufacturer Pandora, with a US$2.1 billion offering.
Almost 9 out of 10 global IPOs priced within their initial filing range
While price-sensitive investors grew more cautious after mixed performances of some high-profile debuts, 86% of global IPOs in the first 11 months of 2010 priced within their initial filing range2 -- compared to a historical 10 year average of 74.3%. Only 11% of IPOs priced below their initial price, while 3% priced above.
Financial and infrastructural companies were most active
The top three sectors accounted for 63% of total value: financials (US$ 74.9b), industrials (US$52.7b) and materials (US$34.8b). The leading sectors by number of deals were materials (254 IPOs); industrials (208); and high technology (160).
Continues Ericksen: “Asian insurance companies and banks drove global IPO markets, while the high level of activity by industrial and materials companies reflects the focus by emerging market governments on modernization of their infrastructure."
Greater China exchanges achieve record highs for fundraising
The Hong Kong Stock Exchange, buoyed by the Agricultural Bank and AIA listing, dominated global IPO markets in 2010. The HKEx raised US$ 61.2 billion in 74 IPOs (24% of global proceeds). Shenzhen Stock Exchange ranked second, raising US$40b (15.7%), while the New York Stock Exchange came in third raising US$31.1b (12.2%). Ranking fourth, Shanghai Stock Exchange raised US$15.9b (6.3%).
Due to demand for Chinese high growth companies and attractive pricing, Shenzhen was the most active by number of deals, with 288 deals (24% of total numbers). HKEx saw 74 deals (6.2%),and the NASDAQ and New York Stock Exchange hosted 70(5.8%) and 69 deals (5.7%) respectively.
“Despite market uncertainty, new IPO filings continue to increase around the world and a large backlog has built up as companies await greater macroeconomic stability. Therefore we expect the current IPO momentum to continue its upward trend in 2011.” says Ericksen.
Igor Boldyrev, Ernst & Young Partner and CIS Advisory Leader, says: “IPOs in a time of crisis, including the IPOs of Russian companies this year, are further proof of the rule that an issuer’s success depends on a sound business/investment model based on demand in a growing market and effective internal preparation of the issuer. In the near future we will see some interesting IPOs of Russian companies."
About the report
Ernst & Young’s Year-end Global IPO Update covers global IPO activity from 1 January to 30 November 2010.
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1 Greater China includes: Mainland China, Hong Kong and Taiwan
2 Open-price IPOs globally with deal value greater than or equal to US$50 million.