Mixed half-year results in the global IPO market

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In the second quarter, the number of IPOs worldwide fell by 38% compared to the same period last year, with the volume of issues declining by 61%. A recent EY report revealed that Europe remains the most active region for IPOs – despite the uncertainties in the run-up to the Brexit referendum. The strongest decline was observed in China. In spite of the difficult quarter, three Swiss companies went public in the second quarter, two of them abroad.

China and the US in downward trend
The Chinese IPO market registered an especially sharp decline: in the same quarter last year, 139 companies in China and Hong Kong stepped onto the trading floor, while this year their stock exchanges have only seen 58 IPOs in the past three months, representing a drop of 58%. The volume of issues fell by 84%, from USD 30 billion to 4.8 billion. IPO activities in the US also declined sharply, with the number of IPOs falling from 72 to 37. The new entrants on the US stock exchanges generated only USD 6.2 billion – less than half of the 14.3 billion generated in the prior-year quarter.

As in the first quarter, Europe was the most active IPO region in the world, although it, too, suffered declines: the number of IPOs fell by 32%, from 95 to 65, with the volume of issues also declining by 32%, from USD 16.2 to 12.9 billion.

Record IPO in the energy sector
While the first quarter saw only a single transaction worth a billion or more, the second quarter has counted six IPOs with a volume of issues over USD 1 billion. The largest IPO was the listing of the Danish wind farm operator Dong Energy, which generated USD 2.6 billion. The IPO of the US investment fund MGM Growth Properties and that of the food supplier US Foods Holding each generated around USD 1.2 billion. Six of the ten largest IPOs worldwide took place in Europe.

Three Swiss IPOs
In Switzerland, three companies stepped onto the trading floor in the first half of 2016. A strong start was enjoyed by VAT, a vacuum valve manufacturer based in the Rhine Valley, whose shares were issued for CHF 45 in April 2016. The current share price is around CHF 57. Geneva-based GeNeuro, which develops treatments for autoimmune diseases, was listed on Euronext Paris. In April 2016, the company issued over 2.5 million shares for EUR 13 each, generating around EUR 33 million. In May 2016, Talkpool, a network service provider based in Chur, was listed on Nasdaq First North in Stockholm. Its shares are currently trading slightly lower than the IPO price.

“Although many IPO candidates are on the lookout for profitable investment opportunities,  they remain cautious and are holding back for the time being,” comments Alessandro Miolo, a partner at EY, with reference to the current market situation. The gloomy global economic outlook has also made IPO candidates more hesitant. “The summer months have been rather quiet so far with regard to IPOs. Uncertainty has increased with Brexit. Investors and companies have to analyze the various scenarios, and I don’t believe that their analyses will stimulate the IPO market. If politicians can quickly clarify the future framework conditions, and the phase of uncertainty is not protracted, there might still be greater momentum toward the end of the year,” says Miolo.

Attractiveness of selling curbs IPO activities
Ongoing vitality in the M&A market is also slowing down IPO activities. A well-organized sale is much easier to control than an IPO, which is dependent on numerous external factors. “Private equity businesses and firms wishing to dispose of subdivisions tend to prefer a sale over an IPO, particularly since strategic investors are very keen to buy. Prices can be pushed right up,” explains Miolo.

Details of the study
The analysis on which this news release is based includes all IPOs that took place up to 18 June 2016 and EY’s estimate of IPOs still to be completed in the rest of the month. Data was sourced from Dealogic. You can find more information about EY’s IPO-related activities here: www.ey.com/ipocenter

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