Global IPOs marred by banks and recession enjoy few bright spots
31/03/2023 10:05
By Pablo Mayo Cerqueiro, Echo Wang and Elisa Anzolin
LONDON/NEW YORK, March 31 (Reuters) - A banking crisis
and worries of a recession have dampened the outlook for initial
public offerings (IPOs) this year, prompting companies to slow
down their plans to go public in what is likely to result in
lower fees for investment banks.
Despite a rebound in fundraising and block trading activity,
year-to-date IPO volumes came in at their lowest level since
2019. Stock market flotations worldwide have raised close to $26
billion so far, according to data from Dealogic.
The lacklustre performance of some early IPOs, including
that of German web hosting provider IONOS IOSn.DE , combined
with the stock market sell-off triggered by the collapse of
Silicon Valley Bank, has forced several companies to delay the
roll-out of their flotation plans.
Equity capital markets (ECM) advisers, however, are
optimistic of a recovery in listing activity in the latter part
of the year.
In the United States, IPO volumes jumped more than 50% from
the fourth quarter of 2022, but were still 11% down from the
same period last year.
IPOs briefly flickered back to life in February, as
companies including solar tech firm Nextracker NXT.O and
Chinese sensor maker Hesai Group HSAI.O pushed ahead with
their listings.
"Realistically speaking, we're looking at the back half of
the year as a starting point (for an IPO market reopening),"
said Keith Canton, head of ECM for the Americas at JPMorgan
Chase & Co JPM.N .
A bright spot for IPOs was the energy transition industry,
where the pipeline is expected to remain robust, according to
IPO bankers.
"We (also) expect some high quality and long-standing
consumer assets to emerge once market volatility dissipates,"
said Daniel Burton-Morgan, head of the Americas syndicate for
ECM at Bank of America BAC.N .
Further cross-border deals, including the long-anticipated
IPO of SoftBank Group Corp's 9984.T British chipmaker Arm, may
also help boost U.S. volumes in 2023.
RECOVERY DELAYED
In Europe, investment bankers said the market volatility
spurred by the banking crisis is likely to affect the pipeline
of deals.
"What's happened with banks has led to a big pick-up in
volatility in equity markets. Enthusiasm has fallen back again,
but there will still be IPOs before summer – it very much
depends on the individual company," said Andreas Bernstorff,
head of ECM in EMEA for BNP Paribas BNPP.PA .
For instance, German lender OLB, backed by Apollo Global
Management APO.N , and Swiss skincare specialist Galderma, have
put their IPO plans on hold due to the current market
conditions, according to people familiar with the matter.
Some, however, are hopeful of a pickup in market sentiment
before the next wave of deals are launched.
Gambling firm Lottomatica, which is also backed by Apollo
and furniture group Italian Design Brands, are among a handful
of companies that are still pushing ahead with their plans to go
public in the second quarter, sources said.
Lottomatica is looking to sell upwards of 400 million euros
($435.08 million) of new shares to bring down debt, plus an
undetermined amount of existing stock, sources added.
"Had these events (the banking crisis) happened this time
next month, when the IPO window opens, that would've been a lot
more damaging," said Lawrence Jamieson, head of EMEA ECM at
Barclays BARC.L .
The Middle East was another bright spot for listings as
several well-known names including Oman oil driller Abraj Energy
ABRJ.OM and Adnoc Gas ADNOCGAS.AD in the United Arab
Emirates (UAE) launched their flotations.
"The Gulf region has so far been immune to the nervousness
that has rattled European markets, so we expect to continue to
see IPOs coming out of countries like Saudi Arabia and the UAE,"
said Chris Laing, who oversees HSBC's HSBA.L ECM activities
across Central and Eastern Europe, Africa and the Middle East.
While shares sales in Asia-Pacific witnessed a 19% drop in
volumes, the region still made up for about half of global
equity capital markets activity, including a roughly $9 billion
stake sale in Japan Post Bank 7182.T .
Spokespeople for Apollo and Lottomatica declined to comment.
OLB did not respond to a request for comment.
($1 = 0.9194 euros)
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IPO drought weighs on global ECM https://tmsnrt.rs/3zk1yvO
Global ECM off to slowest start since 2019 https://tmsnrt.rs/3nBaPwQ
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(Reporting by Pablo Mayo Cerqueiro in London, Echo Wang in New
York and Elisa Anzolin in Milan; additional reporting by
Emma-Victoria Farr in Frankfurt; Editing by Anirban Sen, Elisa
Martinuzzi and Sharon Singleton)
((Pablo.MayoCerqueiro@thomsonreuters.com;))