Significant drop in IPO activity on global markets

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Global IPO activity fell by 39% in the first quarter, with the volume of issues dropping by 70% to the lowest level since 2009. Six of the ten largest IPOs worldwide took place on the European IPO market, while the US saw the steepest decline. There have been no IPOs on the Swiss stock exchange so far, as candidates are waiting for the right moment.

Zurich, 22 March 2016 – In the typically weak first quarter, high volatility on global stock markets resulted in a sharp drop on the market for IPOs (Initial Public Offerings): in comparison to the prior-year period, the number of transactions dropped by 39%, from 274 to 164. The volume of issues dropped even more sharply – by 70% – from USD 39.9 billion to USD 12.1 billion. This means that the global volume of issues is at its lowest level since the second quarter of 2009.

The US market was hit hardest, with only 10 IPOs, in comparison to 35 in the 2015 period and 71 in the first quarter of 2014. The new entrants on the US stock markets only generated USD 750 million (Q1 2015: USD 6.15 billion). Meanwhile, IPO activity also declined sharply on the other two key markets in Europe and China: in Europe, the number of IPOs was roughly halved, from 67 to 34, while in China (including Hong Kong), it declined by 61% from 97 to 38.

Within Europe, the UK stood out with reasonably stable IPO activity. Compared to 20 IPOs in the prior-year period, 16 companies went public in the UK in the first three months of this year. In Switzerland, however, not a single company stepped onto the trading floor in the first quarter.

“The markets slowed down after a strong fourth quarter for IPOs in 2015. The reasons for this include the ground lost by the stock markets at the beginning of the year, the drop in oil prices, and the ongoing geopolitical uncertainty and economic worries,” says Alessandro Miolo, a partner at EY. “Many IPO candidates have chosen to delay or even cancel their IPOs. However, the pipeline is full of companies that are simply waiting for better conditions.”

Alessandro Miolo expects the trend to be reversed in the coming months: “The fundamental economic conditions are sound, both in Europe and the US. The global IPO market is supported by the central banks’ low-interest-rate policy, along with the relatively high rating levels and the large amount of liquidity in the market. Investment opportunities are rare in an environment like this characterized by negative real interest, and investors are highly interested in seizing the exciting ones. If the stock markets continue to settle, chances are good that an increasing number of IPO candidates will take the leap.”

In light of lower volatility, and on the basis of the results and prospects of the current reporting season, Alessandro Miolo thinks activity may well increase in the second quarter – especially as the recent price gains on the stock markets and the current upward trend in oil prices have noticeably improved conditions.

The largest IPO in the first quarter was that of China Zheshang Bank, which went public in Hong Kong, generating USD 2 billion. All other IPOs generated significantly less than USD 1 billion: the second largest transaction in the first quarter was the IPO of the Japanese company REIT LaSalle Logiport (USD 871 million), followed by that of the British company Metro Bank, which generated USD 613 million. Six of the ten largest IPOs worldwide took place in Europe.

IPO candidates will continue to face high volatility
Despite the weak start to the year worldwide, Alessandro Miolo remains cautiously optimistic about the Swiss market. “Last year, with the IPO of Sunrise in the first quarter, we witnessed an unusual event due to the high volume of issues. With USD 2.65 billion from two IPOs, 2015 was a very successful year. I do not expect developments at the same level this year. A handful of interesting IPO candidates from various sectors is on the starting blocks, and some have already announced their plans publicly.”

However, Alessandro Miolo warns: “The windows for IPOs were only open for a short time in recent years, and that will likely be the case this year. The stock and currency markets are highly sensitive, and economic developments are fragile – that’s why, when the capital market environment is favorable, IPO candidates have to be able to seize their opportunities quickly.” In this context, he emphasizes the increasing importance of flexibility in terms of timing and the issue concept, good preparation and the timely and highly targeted contacting of investors, in particular. “There is still strong interest in IPOs, and some Swiss companies are simply waiting for the right time.”

About the study
The analysis underpinning this media release includes all IPOs that took place up to 11 March 2016 and EY’s estimate of IPOs still to be completed in the rest of the month. Data is sourced from Dealogic. You will find more information about EY’s activities concerning IPOs here: www.ey.com/ipocenter


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The EY organization is represented in Switzerland by Ernst & Young AG, Basel, at ten locations, as well as by Ernst & Young AG, Vaduz, in Liechtenstein. In this publication, «EY» and «we» refer to Ernst & Young Ltd, Basel, a member firm of Ernst & Young Global Limited.