Global IPOs hit record levels in 2007

Emerging market activity driving global growth as London slows down says Ernst & Young

London, 17 December 2007 : A boom in emerging markets IPOs has easily outweighed any slow down in capital market activity in London and New York, according to the 2007 Ernst & Young IPO report launched today.

The report shows that by the year end we could come close to exceeding the previous record number of 1,883 set in 2000 - with 1,739 IPOs from January through to the end of November.

It is already a record year in terms of the value of the deals done - $255bn – up from the previous record of $246bn in 2006.

Ernst & Young expect the year-end spike in IPO activity, seen in 2006, to be repeated in 2007, with preliminary data for the first two weeks of December indicating a further $18bn to be raised in 91 IPOs.

Where is the global activity taking place?
Emerging Markets continue to drive activity in the IPO market in 2007. BRIC countries altogether raised US$106.5 billion in 382 deals. Q3 07 was a record quarter in number of IPOs for BRIC countries.

Seven out of the top ten IPOs and 14 out of the top 20 IPOs by capital raised were from emerging markets. Two out of the top ten IPOs were from Brazil, and three of the top 20 IPOs by capital raised were from Brazil. Two out of the top 10 IPOs were from China, and six out of the top 20 IPOs by capital raised were from China.

Michael Lynch Bell, IPO partner at Ernst & Young says: “While the exchanges in the developed world had a strong first half of the year, activity really slowed in August and September as high market volatility began to have an impact. By total contrast IPO activity in the emerging markets touched record levels in the second half of the year.”

By number and value of IPOs
There were only 88 listing by early December in 2007 compared to 142 domestic listings in 2006 and 118 in 2005. Again the value of those listing fell dramatically from the record year of 2006 from $18.6bn to $9.5bn, a decline of 49%. The UK was third in Europe behind Russia and Germany in terms of value. The largest domestic IPO was Sports Direct International plc.

David Wilkinson, IPO partner at Ernst & Young comments: “It is easy to plot the impact of the downturn in market conditions in the UK. Up to the end of July 2007 there were 65 domestic IPOs, including 14 in the month of July. Since August 1 there have only been 23 listings most of which have been relatively small. We are hopeful of a modest improvement in the first half of 2008, but this is a challenging market to list in at the moment.”

By contrast the three most active countries in terms of IPOs were China, Australia and the US with 227, 189 and 178 domestic IPOs respectively. By value China, US and Brazil were the leaders with US$54.4 billion, US$38.7 billion and US$29.0 billion respectively being raised.

By exchange
As with 2006 the Hong Kong Stock Exchange led the way in terms of the value of IPOs listing in 2007. That dominance has slipped however from $46bn to $32bn and a decline in market share from 19% to 13%.

The US exchanges had a better year in 2007. IPOs listing on NYSE increased in value from $24.5bn to $29bn and on NASDAQ up from $18bn to $19bn. This was helped by two US IPOs in the Global top 10, Blackstone and MF Global.

London had a relatively weak year after the run away successes of 2005 and 2006. The value of listings on the LSE was down from $33.5bn to $26bn a decline of over 20%. AIM also fell from $8bn to below $7bn a 14% decline.

By numbers of IPOs London also fell away. In 2006 AIM led the global exchanges with 195 listings. That figure slipped in 2007 to 127 or a decline in market share from 11% to 7.3% falling behind the ASX (192) and NASDAQ (134) exchanges.

Lynch-Bell explains, “The picture in London could have been much worse without the largest global IPO of 2007, VTB Bank worth $8bn, listing in London. Both LSE and AIM will have to fight hard to maintain their pre-eminent status in the next 12 months.”

Emerging markets year of success
Not only did the emerging markets help the major Western stock exchanges like NYSE and LSE companies, IPOs from countries like Columbia, Dubai, Brazil and India all featured in the top 20 listings worldwide and chose to list on their own domestic bourses. In terms of the share of market, 2007 saw a remarkable rise in value and number of companies listing on exchanges outside the main 12 bourses that have tended to dominate listings in the last decade.

Gil Forer, Global director of IPO Initiatives at Ernst & Young said, “The increased activity across the emerging markets stems from the growth of their economies and the ongoing globalisation of the capital markets. This has seen the rise of new world-class financial centres, investors looking further afield for investment opportunities, and the continuing trend of companies looking to list on domestic exchanges – almost all of the top 20 IPOs in 2007 went public in their home countries”

Nor does it look like the flow of IPOs in the emerging markets will slow down over the next 12 months. Forer explains, “The pipe-line of IPO-ready companies looking to list in 2008 looks healthy, especially across the emerging markets.”