NEW YORK – The global IPO market continued its downward track in the second quarter, notching its fourth consecutive period of declining deals in nearly every corner of the world.
Broad market conditions remained unstable because of the credit crisis in Europe, mounting concern that growth was slowing in China and signs the US recovery could be losing steam. That created a sour environment for bringing initial public offerings to market, and the net result was a total of 201 deals world-wide in the second quarter, half the 428 offerings seen during the same period in 2011, according to data provider Dealogic. On a dollar-volume basis, new offerings raised $40.1 billion globally, down a third from the $62.4 billion seen last year.
The outlook for global IPO issuance is uncertain at best, and grim at worst. “It’s increasingly difficult to bring an IPO to the marketplace now,” said David Hermer, head of equity capital markets for the Americas region at Credit Suisse Group. “We expect the market to remain so until we get some positive direction in the ‘macro’ environment.”
Negative year-over-year comparisons globally have been the norm since the third quarter of 2011 as well as for most major regions of the world. To give a sense of just how bad business is, the total number of IPOs priced world-wide in the second quarter is lower than the number seen only from emerging-market countries in the same period a year ago. On a dollar volume basis, even with the jumbo $16 billion offering from Facebook Inc. in the US, the amount of money generated by IPOs around the globe in the second quarter lags that seen in emerging markets alone in the fourth quarter of 2010, by Dealogic’s count.
Even China, which had been the largest single component of the global IPO market since 2009, lost its footing, as investors continued to show concern about the country’s economy and remained hesitant about buying Chinese IPOs in the wake of accounting and corporate-governance scandals. A total of 74 deals raised $7.2 billion during the quarter, down from the 100 that raised $14.2 billion in the same period of 2011. Not a single Chinese IPO cracked the world’s top 10 deals.
The third quarter could get off to a sluggish start there. However, China fared better than Europe, where 27 IPOs raised $808 million during the second quarter, compared with the 111 that raised $25 billion in the same period last year, by Dealogic’s count. The region was the epicenter of uncertainty throughout the quarter, with widespread concern over the euro-zone debt crisis.
“We think right up until the end of 2012 will continue to be volatile, and we’re hoping for an anemic recovery in 2013” in Europe, said Maria Pinelli, global vice chairwoman for strategic growth markets at Ernst & Young. “A lot will depend on agreements between the EU leaders on eurozone crisis.”
The US was the sole bright spot, where 30 IPOs raised $22.5 billion in the second quarter, compared with the 31 deals that raised $9.1 billion in the same period a year ago. The third quarter is always tough, but coming off of Facebook this year, it will be even harder,” said Paul Deninger of investment bank Evercore Partners Inc. – SG/Agencies