«Global IPO Trends» 1Q 2017

Boom in China drives global IPO market to record high

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  • Strongest first quarter since 2007: number of IPOs almost doubles
  • Volume of issues up 146% at US$33.7b
  • Almost half of global IPOs accounted for by China
  • Slump on Swiss stock exchange: Swiss firms go abroad

ZURICH, 4 APRIL 2017 ‒ In the first quarter, the number of IPOs rose by 92% compared to the same quarter last year, totaling 369. Meanwhile, the volume of issues more than doubled, from US$13.7b to US$33.7b, according to the current IPO barometer produced by auditing and advisory firm EY. In terms of numbers, the first three months of this year were the most active first quarter since 2007. The Chinese market currently dominates the global IPO scene, with Chinese stock exchanges (including Hong Kong) recording a total of 182 transactions – after just 43 IPOs in the same period last year. The volume rose from US$5.7b to US$12.4b. This means that China accounted for 49% of all IPOs and 37% of the volume of issues.

The US market also made a good start to the year, mainly thanks to the listing of instant messaging service Snap (Snapchat) – at US$3.9b, the world’s largest transaction in the first quarter. The volume of issues in the US shot up from US$0.7b to US$10.8b, while the number of IPOs tripled from 8 to 24. In Europe, the volume of issues was about the same as in the previous year, at US$4.1b, while the number of IPOs actually fell from 40 to 33, owing in the main to the weaker showing on the UK market.

China and the US on the up
“After several years of weakness, the US market is getting going again. The reasons for this are a reawakened interest in tech IPOs and business hopes for investment and tax cuts,” explains Roger Müller, Partner and IPO Leader at EY Switzerland. “In China, the regulatory authorities are now approving IPOs even more rapidly than they did last year. 2017 will therefore be a strong year for Chinese IPOs: at present, 800 companies in China and Hong Kong are awaiting approval.”

Europe, on the other hand, is in a more difficult position at present, according to Roger Müller: “Although the European economy is moving in a positive direction and share prices are performing well, political uncertainty is still weighing on investor sentiment: the details of Brexit remain to be clarified, forthcoming elections are causing uncertainty and the consequences for European companies of the US administration’s economic and tax policies are unclear.”

The largest IPOs in the first quarter, besides Snap, were the listing of US real estate group Invitation Homes, which raised US$1.8b, and the IPO of Mexican drinks manufacturer Becle SAB de CV (US$904m). Two of the ten largest IPOs worldwide took place in Europe – both in Spain: the IPOs of security services provider Prosegur Cash (US$798m) and the construction project developer Neinor Homes (US$753m).

Swiss stock exchange to get going in second quarter
No IPOs took place on the Swiss stock exchange in the first quarter. However, there is the prospect of at least one IPO in the second quarter: the Berne-based healthcare group Galenica has confirmed that it will split up its business into a pharmaceuticals operation and a logistics and pharmacy business, and intends to float the latter in the second quarter of 2017.

Roger Müller also anticipates further IPOs in the current year. “As usual, the Swiss IPO market is taking some time to get moving. The second quarter usually sees increased activity. External shocks and a high level of geopolitical risk are part of the new normal. Companies that are well prepared and flexible enough to make swift use of their opportunities are at an advantage.”

Swiss life sciences firms listed abroad
Two life sciences companies from western Switzerland opted to list on foreign exchanges in the first quarter of 2017. The Geneva biotech start-up ObsEva successfully floated on the US technology exchange Nasdaq in January 2017 and raised just under US$97m. Meanwhile, a few weeks ago the biotech company GenKyoTex, likewise based in Geneva, listed on Euronext in Paris; this came about through a reverse merger with the French biotech company Genticel. The Vaud-based medtech firm Symetis had also planned to list itself on the stock exchange in Paris last week, but then chose to accept an attractive takeover bid by US group Boston Scientific instead.

“As was the case last year, many Swiss firms are still opting for exchanges abroad to raise money. The life sciences sector remains especially eager to access the capital market. Nasdaq, in particular, with a strong emphasis on this industry and good investment terms, is a major pull for Swiss companies,” explains EY Life Sciences Partner Jürg Zürcher.

Swiss stock exchange becoming less attractive
“The lack of a large, dominant exchange is one of the biggest challenges for the European biotech sector. The different trading venues compete against each other and are therefore losing still more candidates to the US. The Swiss stock exchange needs to watch out that it doesn’t lose yet more of its previous attraction for the sector,” Jürg Zürcher continues.

About the study:
The analysis underpinning this news release includes all IPOs that took place up to 24 March 2017 and EY’s estimate of IPOs still to be completed by the end of the month. Data sourced from Dealogic and CB Insights. You will find more information about EY’s activities concerning IPOs here: www.ey.com/ipocenter


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