London 6 October 2010: Global IPO fundraising picked up in Q3, despite market volatility and fewer deals launched. Asia’s growth story continues to fuel global IPO markets. The US$22.1b mega IPO of the Agricultural Bank of China was the largest ever, making up almost half (42%) of total IPO funds raised globally this quarter.
In third quarter global IPOs raised a total of US$52.7b in 286 IPOs, (compared to US$46.8b raised in 311 listings in the previous quarter), according to EY’s Q3 2010 Global IPO update. Investors grew more cautious in Q3 amidst the economic uncertainty, however, despite some challenging high-profile debuts, 84% of global IPOs in Q3 were priced within their initial filing range, while 4% priced above. Global IPO activity in the first three quarters of 2010, US$152.7b raised in 888 deals, has already exceeded total yearly 2009 levels, (US$112.6b in 577 listings).
Gregory K. Ericksen, Global Vice Chair for Strategic Growth Markets for EY says: “There are still numerous growth-seeking companies going public. After two years of waiting for the window of IPO opportunity to open, companies are accepting less aggressive valuations, expecting to return to the market at a later date and raise more capital through follow-on offerings.”
UK exchanges lead a sluggish European IPO market Numerous European IPOs were postponed or cancelled due to market uncertainty exacerbated by the sovereign debt crisis. In a 68% drop on Q2 proceeds, European companies raised US$3.1b in 49 IPOs in the quarter.
UK exchanges led European IPO activity with US$1.9b raised in eight offerings (two on the main market, six on AIM), including the fourth largest IPO in Q3 – the US$1.0b London listing of metals and mining holding company, Vallar PLC.
The number of listings on UK exchanges fell in quarter three from eleven in Q2 2010 and fourteen in Q1 2010. Five UK companies floated on London exchanges, including Ocado Group plc, NBNK Investments plc and Central Asia Metals plc.
“The summer months are traditionally a quieter period for IPOs and quarter 3 2010 has been no exception on UK exchanges,” said David Wilkinson, UK IPO Leader at EY. “The market continued to be difficult for new issues, with volatility caused by the likely impact of the Government Spending Review, preventing any significant return of market confidence.”
David continued: “The pipeline of companies looking to float remains strong, but many UK companies are holding back until volatility reduces and valuations improve. Betfair’s planned float, if successful, is likely to be a rare bright moment in an otherwise quiet end to 2010 for IPOs.”
Emerging markets in Asia, particularly China, fuel IPOs In Q3, Asian issuers accounted for 83% of dollar volume, (US$43.8b in 173 IPOs). Chinese issuers alone made up over three-quarters (76%) of global fundraising (US$40.1b in 110 deals -- a 147% increase in total proceeds from Q2).
The emerging markets accounted for half of the top 20 IPOs in Q3. All of these deals were from Asia: China (8), Indonesia (1), and India (1). In Q3, out of the top 20 IPOs, ten IPOs were from developed markets: the United States (3), the United Kingdom (2), Canada (2), and the Netherlands (1) Germany (1), Australia (1).
Shanghai and Shenzhen stock exchanges achieve record highsIn 2010, IPO volumes on the Shanghai and Shenzhen stock exchanges reached their highest levels ever. Due primarily to the Agricultural Bank of China dual listing, in Q3, the Shanghai Stock Exchange raised the most capital (US$15.6b), followed by the Hong Kong Stock Exchange which raised US$14.0b (30% and 27% of global capital raised, respectively). The Shenzhen Stock Exchange ranked third by dollar volume (19%) with US$10.0b funds raised. Says Ericksen, “In upcoming quarters, Shanghai is expected to maintain its current status as the world’s leading exchange for capital raised, evidence of its growing liquidity and maturity.”
PE and VC-backed deals make up almost four-fifth of US IPOs Under pressure to release capital to investors, exit-seeking PE and VC firms accounted for 80% of US fundraising in Q3). US exchanges raised a total of US$5.1b in 34 deals, a 7% decline in capital raised from Q2. A large backlog of 124 companies has built up in the US, with many sitting in registration much longer than normal.
Financials, metals & mining, industrials and technology are the most active IPO sectorsA wide variety of companies sought a public listing in the quarter. The financial sector was the most active, representing over half (51%) of all funds raised (US$26.8b in 24 IPOs), evidence of keen investor interest. The second most active sector was the materials sector (US$5.7b raised in 64 IPOs), reflecting emerging market demand for commodities. In third place was the Industrials sector (US$5.7b in 52 deals), which clearly benefited from government stimulus packages worldwide targeting infrastructural development. In fourth place was the high-performing technology sector, (US$4.5b raised in 36 IPOs), which experienced revenue growth even during the economic downturn.
Future outlook Ericksen concludes: “We have seen a gradual improvement in IPO markets in the past nine months. The global IPO pipeline continues to build up with numerous businesses world-wide seeking to fund their rapid growth. Assuming the macroeconomic environment continues to stabilize, we anticipate that global IPO markets will improve.”