Initial public offerings (IPOs) have plummeted globally in the first quarter of this year after a record showing last year, as volatility stoked by the war in Ukraine and soaring inflation set investors on edge and inhibited deals.
About US$65 billion has been raised via IPO around the world so far this year, down 70 percent from US$219 billion in the first three months of last year, data compiled by Bloomberg showed.
That puts the global market on track for the lowest quarterly proceeds since the onset of the COVID-19 pandemic in 2020.
Photo: Brendan McDermid, Reuters
Still, companies such as renewable energy provider Eni Plenitude SpA and skin care business Galderma SA are lining up to test investors’ appetite for new shares in the coming months.
“This is probably the worst time in five years in terms of market sentiment,” said Li Hang (李航), head of equity capital markets and syndicate at brokerage CLSA.
Rising interest rates combined with sharp market swings have prompted investors to steer clear of companies with high growth forecasts, but relatively little profits — the kind of stocks that dominate the IPO market.
“You need a more stable market to find the level at which IPOs can clear,” said Saadi Soudavar, Deutsche Bank AG’s cohead of equity capital markets for Europe, the Middle East and Africa.
Wild market swings have scuttled IPOs from New York to New Delhi.
Life Insurance Corp, which planned to raise as much as 654 billion rupees (US$8.57 billion) for the Indian government with an offering before the end of this month, is looking at a new date in the middle of May. The offering would be one of the largest global listings this year.
Even quick-fire deals such as blank-check offerings, which are typically priced in a matter of days, are falling by the wayside. The vehicles, also known as special purpose acquisition companies, are shelving their listings at a record pace this year, as investor enthusiasm wanes due to poor returns and heightened regulatory scrutiny.
Investment banks are starting to feel the effects, too.
UBS Group AG began laying off a handful of bankers in equity capital markets in Europe, the Middle East and Africa this month, people familiar with the matter said.
However, it is not all doom and gloom.
While follow-on share sales start to pick up from Asia to Europe and the US, IPOs have been bucking the global trend and racing ahead in the Middle East, where high oil prices and rising interest rates are helping regional markets sharply outperform international ones.
“The Middle East is the one bright spot in an otherwise quiet global ECM [enterprise content management] market,” said Andree Chakhtoura, head of investment banking for the Middle East and North Africa at Bank of America Corp. “There is a wider and deeper market now than there has ever been before, and the offering is diversified.”
Bankers continue to bet on a recovery in the second quarter, fueled in part by a full pipeline of large listing candidates readying to tap public investors and the green shoots of a stock market rebound.
“A key question is when we can price the substantial pipeline of European IPOs waiting in the wings. We are hoping the answer is as early as May, June,” Soudavar said.
A number of high-profile listings from the likes of Thyssenkrupp AG’s Nucera and Italian green hydrogen specialist Industrie De Nora SpA are in the works in Europe. In the US, pop star Rihanna’s Savage X Fenty lingerie company and SoftBank Group Corp-backed chipmaker Arm Ltd are among the big-ticket IPOs bankers are working on.
In Asia, private equity firm PAG and electric vehicle start-up Hozon New Energy Automobile Co (合眾新能源汽車) are in the pipeline with billion-dollar-plus offerings.
“The glass half-full view is that we could be in for a busy second quarter in equity capital markets,” Andreas Bernstorff, BNP Paribas SA’s head of equity capital markets for Europe, the Middle East and Africa, said, adding that he expects “to see block trades and equity-linked deals pick up first and IPOs scheduled after Easter on the back of first-quarter numbers.”
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