Asia still dominates listings although US PE-backed IPOs return strongly in Q1
- NYSE takes the lead among exchanges by raising US$13.8b
- Latin America ahead of Europe for the second time in three years
LONDON, KYIV, 12 April 2011 – US PE-backed listings drove global IPO activity in the first quarter of 2011, with the New York Stock Exchange (NYSE) taking the lead among world exchanges for the first time in two years. While the US exchanges began closing the gap on Chinese IPO dominance (32%), the Greater Chinese exchanges raised more than a third of total capital raised (37%) globally. The last few weeks of the quarter saw choppy stock markets spiked by the Japanese disaster and Middle East political unrest, which slowed down the overall pace of global IPO activity, particularly in EMEIA, according to Ernst & Young’s Q1 2011 Global IPO update.
In the first three months of the year, global IPO activity saw 290 deals worth US$46.1 billion, down 14% by capital raised, compared to the same period last year. For the first time since 2008, the NYSE took the lead among world exchanges, raising US$13.8b (29.8%) of the total capital, followed by the US$11.2b (24.3%) capital raised on the Shenzhen Stock Exchange, (US$5.6b), Singapore (12.2%), and (US$4.5b), Shanghai (9.8%).
Gregory K. Ericksen, Global Vice Chair for Strategic Growth Markets for Ernst & Young says: “In the first quarter of 2011, the NYSE was the leader among world exchanges for IPOs, due largely to an increase in number of PE-backed offerings and an improving US economic outlook.”
US IPOs boosted by a surge in PE exits
In Q1, the NYSE and NASDAQ exchanges raised US$14.9b combined, driven by smaller companies, particularly in the health care and energy sectors. US PE investors continue to exit earlier leveraged investments, including America’s largest hospital chain operator, HCA Holdings Inc. which raised US$4.3b in March, the largest PE-backed IPO in history. Bolstered by rising oil prices, energy company Kinder Morgan, completed a US$3.3b IPO, the third largest PE-backed deal ever.
Jeff Bunder, Global Private Equity Leader at Ernst & Young says: “This year could be the biggest on record for PE-backed IPOs, given increasing demand for new issuances and ample of supply. Investors’ appetite for such deals has been tested and reinforced over the last several quarters, setting a solid foundation for 2011.”
Many PE-backed IPOs in global pipeline
Currently 56 PE-backed companies are in registration to go public, which could raise an aggregate US$14.7b across global exchanges. In addition to companies that have formally filed, the sometimes volatile nature of the 2009-2010 market has also led to a sizeable shadow pipeline of PE-backed companies that either have yet to make an initial filing, or withdrew an IPO based on negative market conditions but remain interested in an IPO. Many of these companies are likely to make another run at public ownership sometime in 2011.
Vladyslav Ostapenko, Head of Corporate Finance at Ernst&Young Ukraine comments:
“For Ukraine, no doubt, 2011 can also be the biggest on record for sold IPO. Though in Ukraine there are a few active private equity funds, the main IPO initiators are not PE-funds, but private individuals – business owners who seek to take advantage of intensification of the capital market and open "IPO window" for raising additional capital and strengthen market positions. Last year's placement successfully proved that the market was open and waiting for new issuers, so a large number of companies since last year are under active preparation for an IPO. We may see about 10 placements, mainly on the Warsaw Stock Exchange, and primarily agricultural companies.”
Asia issuers continue to lead by number of deals and capital raised
China and Hong Kong issuers continued to lead global IPO activity with 110 deals (accounting for 38% of total deals globally); valued at US$18.3b (52% of global fund raised). The largest global IPO in Q1 was the US$5.5b Singapore listing of Hong-Kong based transportation conglomerate, Hutchison Port Holdings, reflecting an upturn in global trade and container traffic following the global financial crisis. The second largest IPO in Asia (and the fifth largest globally) was the US$1.4b Shanghai listing of clean energy company, Sinovel Wind Group Co Ltd, maker of wind turbines.
Latin America raises more capital than Europe
Fuelled by high rates of GDP growth, domestic consumption, foreign capital inflows, and infrastructure investment, Brazil, Argentina and Mexico raised US$2.7b in seven IPOs globally. Latin America’s largest economy, Brazil conducted five IPOs, raising an impressive US$2.1b as local companies tapped the stock market to finance expansion plans.
By contrast, Europe raised just US$2.2b in 50 listings, well below the US$ 8.4b in 48 deals raised over the same period last year. Although European IPO pipelines remain packed with companies keen for public capital, sovereign debt concerns and global uncertainty continue to hamper valuations and dampen European investor appetites.
Industrial and materials sectors dominate IPOs
In Q1, the industrials sector (particularly transportation and machinery companies), raised the most funds (US$12.6b). This was followed by the energy sector (US$7.9b in 23 deals) and health care sector (US$6.2b in 29 deals). By number of deals, the leading sectors were the materials sector (60 deals valued at US$4.6b), industrials sector (48 deals) and technology sector (35 deals worth US$2.8b).
Future outlook
Concludes Ericksen, “Recent turmoil in the Middle East and Japan has unsettled broader stock market indexes, spooked investors, and slowed down the pace of new issuances in March. However, investors have been waiting for sometime now to invest their capital, and the IPO market is still open for the right growth story and realistic valuation.”
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