Sharp Decline in Global IPO Deal Value and Volume in Q3 but Recent Listings Suggest More Deals to Come in Q4 2012
Global IPO activity continued to drop in Q3 2012 although; recent listings suggest a market improvement in the coming months, according to Ernst & Young’s latest Global IPO update.
So far this quarter, global IPOs have raised US$24.1b, down 46% by capital raised, compared to Q2 2012 (US$44.3b) and down 16% compared to Q3 2011 (US$28.6b). By deal volume, the number of IPOs totaled 165 deals globally in Q3 2012, down from 248 deals in Q2 2012 representing a 33% drop in Q2 2012, and to 291deals for the same period last year (43% decrease).
This quarter, the overall capital raised was boosted by Japan Airlines US$8.5b IPO, which accounted for 35% of total global value in Q3 2012. By fund raised, the top three exchanges in Q3 were Tokyo Stock Exchange, Shenzhen Stock Exchange (12%, US$2.8b in 35 IPOs), and Bursa Malaysia (10%, US$2.4b in 4 IPOs).
Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young comments: “We had slow activity over the summer months as well as the postponement of a number of high profile listings this quarter. However, with one major deal in the last couple weeks and two US$1b-plus deals expected shortly, we are more positive that significant investor confidence will return next quarter.”
Robust Asian IPO pipeline
The Asian markets accounted for 76% of global IPO funds raised in Q3 2012, with 102 deals raising US$18.3b compared to 119 deals which raised US$15.8b in Q2 2012. Greater China alone accounted for 35% of deal numbers and 25% by capital raised (58 deals, raising a total of US$6.0b). Compared to the same period last year, Asian exchanges increased their capital raised quarter-on-quarter, but the number of deals declined (136 deals which raised US$13.4b altogether).
Maria comments: “Although, activity in China and Hong Kong was down in the quarter in line with the overall decline in economic growth, some markets, like Malaysia and Singapore are very active, and some sectors, including mining, industrials and healthcare, are pursuing IPOs. The general consensus is that the Asia Pacific is performing better than last year with confidence due to some exceptionally large deals.”
Out of the top 10 global IPOs this quarter, six were listed on Asian stock exchanges. The largest Asian IPOs this quarter were the US$8.5b listing of Japan Airlines Co Ltd on Tokyo Stock Exchange, Malaysia’s IHH Healthcare Bhd which is dual listed on Singapore Stock Exchange and Bursa Malaysia (US$2.1b) and China’s Inner Mognolia Yitai Coal Co Ltd on Hong Kong Stock Exchange (US$0.9b).
“Asia has over 200 companies in the IPO registration pipeline – accounting for more than half of global IPO pipeline. As companies and investors wait for markets to improve, we could expect an uptick in activity in the last quarter of 2012” said Maria.
US volume up but deal size down
The US exchanges raised 15% of global proceeds, or a total of US$3.5b in 23 deals in Q3 2012 (a 30% drop compared to Q2 2012 by deal number). Although value was down on the same quarter last year (19 deals which raised US$3.9b in total), deal volume was up by 21%, largely due to a run of late deals at the end of this quarter.
PE and VC sponsored deals made up 70% of US new issuances by deal number and 64% by capital raised, with 16 deals raising US$2.2b. Maria comments, “Looking ahead, an active debt market and PE exits on the horizon means more IPO activity will occur towards end of 2012.”
Europe continues to lag – Polish IPOs led in Europe
While, Poland’s main market and junior market continued to lead the way in IPO activity by deal number, listing 12 out of the 23 IPO, the European IPO market continued to suffer from difficult economic conditions this quarter. It accounted for just US$372m from 23 IPOs (only 2% of global capital raised) compared to US$985m in 60 deals in Q2 2012.
“As equity capital markets indices move higher and volatility decreases, we expect a return in investors’ and issuers’ confidence, encouraging a gradual improvement in trading volumes. We expect IPOs from carve-out and additional state owned enterprises listings in the coming months,” says Maria.
Industrials, healthcare and materials most active IPO sectors
In Q3 2012, globally the leading sectors by capital raised were the industrial sector (US$10.6b in 29 deals), which clearly benefited from government stimulus packages across the world. The second most active sector was healthcare (US$2.7b via 8 deals), followed by materials (US$2.3b in 27 deals).
Maria concludes, “Several large IPO deals are expected by end of 2012 and the market continues to be opportunistic and selective. We expect more volume in first half of 2013. Industries to watch include technology, consumer products and industrials sectors.”