Global IPO Activity Rose in Q2 2012
Global IPO activity saw an improvement in Q2 2012, according to Ernst & Young’s Global IPO update.
So far this quarter, a total of 206 deals has raised US$41.8b, an increase of 5% by deal numbers and 141% higher by capital raised compared to to Q1 2012 (US$17.4b via 196 deals). However, this quarter was 46% lower by number of deals and 36% lower by capital raised than in Q2 2011 (US$65.6b via 383 deals). The latter was, however, the highest second quarter since Q2 2007.
This quarter, the overall capital raised was boosted by Facebook’s US$16.0b IPO, which made up 38% of this quarter’s total. Even without this IPO, the overall global IPO activity in Q2 2012 (US$25.8b) was 49% higher by capital raised compared to Q1 2012. By fund raised, the top three exchanges in Q2 were NASDAQ, which accounted for 42% of global capital raised with 12 IPOs (US$17.5b), New York Stock Exchange (10.9%, US$4.6b in 15 IPOs), and Bursa Malaysia (8%, US$3.4b in 4 IPOs).
Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young comments: “The second quarter results show relative optimism for capital-raising. However, this optimism is in certain markets and capital market activity continues to be hampered by lack of investor confidence and economic uncertainty. Balanced monetary policy in the developed and emerging economies will be important for investor and issuers’ confidence to return.”
The US and Latin America accounted for 60% of capital raised
Of the top 20 IPOs this quarter, nine listed on the US stock exchange. Excluding the Facebook IPO, North America exchanges still accounted for 24% of capital raised in Q2 2012, (US$6.3b in 31 IPOs, compare to US$6.6 b in 45 deals in Q1 2012). By number of deals, technology companies continue to drive the US IPO market, while energy and consumer products companies led by capital raised.
Maria explains, “The US has maintained steady IPO activity. We are still waiting to see the effects from US government’s Jumpstart Our Business Startups (JOBS) Act, which may help small businesses access the US capital markets and stimulate IPO activity in the long term.”
Compared to only two IPOs listing in Latin America in Q1 2012, Brazil, Columbia and Mexico saw several new issuances this quarter, with 7 IPOs raising US$3b from this region’s exchanges.
Says Maria, “Despite, Latin America difficult market conditions for IPOs at the start of the year, recent improved economic growth, notably in Mexico and Columbia, has had an impact on the IPO activity across the region. The recent follow-on offering by Chilean multi-brand retailer, Cencosud S.A, on NYSE also shows a revival of activity.”
Volatility continues to affect European IPO activity
The European IPO market suffered the most in the quarter as a result of difficult economic conditions with a 68% decline with just US$915m via 46 IPOs (only 2% of global capital raised this quarter) compared to US$2.9b raised via 39 deals in Q1 2012. Understandably, both issuers and investors are just waiting to see how Europe will resolve the sovereign debt crisis.
The largest deal in Europe was the Italian luxury cashmere knitwear company, Brunello Cucinelli SpA, which raised US$229.7m on Borsa Italiana.
Maria comments: “The European IPO market continues to be lackluster, however, despite the current economic and political situation, we saw an increase in number of deals by smaller companies obtaining equity financing, which resulted in smaller average deal size. The deals were from the technology, consumer products, consumer staples and industrial sectors. Warsaw’s junior market NewConnect, London’s Alternative Investment Market and Istanbul Stock exchange were active by number of deals this quarter.”
IPO activity in Asian markets accounted for 35% of global IPO funds raised in Q2 2012 (or 56% of global funds raised when excluding the Facebook IPO), with 104 deals raising US$14.5b. This was an 87% increase compared to the previous quarter (US$7.8b via 96 deals) but 47% decline compared to Q2 2011 (US$27.7b via 165 deals).
The largest Asian IPOs this quarter were the US$3.1b listing of Malaysia’s palm oil producer, Felda Global Ventures Holdings Bhd on Bursa Malaysia and China’s Haitong Securities Co Ltd (US$1.8b) on Hong Kong Stock Exchange. Out of the top 20 global IPOs this quarter, eight were listed on Asian stock exchanges.
Maria comments: “As we expected, former state-owned enterprise (SOE) listings on Greater Chinese stock exchanges continue to decline, however, Asian IPO activity saw increased volume this quarter. Going into the second half of the year, new entrepreneurial players from Southeast Asia will continue to tap into the Asian equity capital markets to raise capital.”
IPOs by sectors
The leading sectors by capital raised were the high technology sector (US$17.9b in 32 deals), financials (US$5.7b via 14 deals), followed by consumer staples (US$4.5b in 18 deals).
Maria concludes, “The pipeline of firms waiting to go public remains high. Both issuers and investors are being far more cautious, particularly in light of the difficult current market conditions. They are just waiting for the global market to stabilize and concerns over global growth to dissipate before they decide to become active again.”