Banking turmoil and recession risks are spelling trouble for the global initial public offering (IPO) market, keeping it mired in a slump even after investors started the year thinking that the worst of the stocks rout might be over.
Companies have raised just US$19.7 billion via IPOs this year, according to data compiled by Bloomberg. That is down 70 percent year-on-year and the lowest comparable amount since 2019.
The steepest fall was seen in the US, where only US$3.2 billion has been raised. The subdued activity follows on from last year, when high inflation and aggressive rate hikes by central banks sapped investors’ risk appetite.
Photo: AFP
A strong equity rally at the start of this year, driven by optimism about China’s emergence from its “zero COVID-19” policy and smaller rate hikes, has largely fizzled out and dashed hopes for a reopening of the IPO market.
Troubles in the banking sector following the collapse of some mid-sized lenders in the US, and Credit Suisse Group AG’s travails, have added to uncertainty around the path of interest rates as the US Federal Reserve works to contain inflation while avoiding more distress.
“Rate is the number one issue, and there is a clear debate around how long the tightening lasts or changes direction and at what speed,” said Udhay Furtado, cohead of equity capital markets, Asia Pacific at Citigroup Inc.
“There are a number of things people will need to see, including central bank direction, to ascertain whether it’s the second, third or fourth quarter,” he said, referring to when the IPO window might reopen. “At this point, it looks like it’s going to be back-ended.”
The stability that IPOs need has been sorely lacking, with a closely watched volatility gauge spiking well above 20 this month following the collapse of Silicon Valley Bank and other regional US lenders.
There are signs that banking troubles are having an impact on companies’ IPO plans.
Oldenburgische Landesbank AG, a private equity-backed German bank, has paused work on a planned IPO that was expected to take place as early as May because of investors’ concerns over the health of the global banking system, Bloomberg News reported on Thursday.
“There’s still so much uncertainty in what’s going to happen at the back end of this year that I think it’s really causing investors to be quite nervous,” said Stephanie Niven, portfolio manager, global sustainable equities at Ninety One. “This feels like an uncomfortable time to be putting capital into businesses we don’t know.”
The one bright spot in equity capital markets activity has been in share sales in listed companies. Secondary offerings have fetched US$76 billion this year, a 48 percent increase from a year ago, the data show.
That includes a block trade in Japan Post Bank that could raise as much as ￥1.3 trillion (US$9.9 billion), the biggest such sale in nearly two years.
Shareholders and companies were quick to sell stock to take advantage of the equities rally at the beginning of the year and secure funding in a rising rate environment.
The higher cost of debt also means that some companies have been unwinding cross-holdings to free up capital for debt repayments and other funding needs.
Fomento Economico Mexicano raised 3.7 billion euros (US$3.99 billion) from a concurrent equity and equity-linked offering in Heineken NV last month, the biggest such deal in Europe, Middle East and Africa since 2004.
Other large selldowns included a US$2.4 billion block trade in London Stock Exchange Group PLC and Belgium offloading US$2.3 billion in BNP Paribas SA stock.
Companies have also turned to convertible bonds, which allow them to borrow more cheaply, given the securities carry a call option. Firms from German food delivery company Delivery Hero SE to Chinese video entertainment company iQiyi Inc (愛奇藝) and electric vehicle maker Rivian Automotive Inc have all sold the bonds. About US$6.4 billion has been raised in convertibles globally this year, data compiled by Bloomberg show.
Even after the volatility caused by the collapse of Silicon Valley Bank, bankers are optimistic that equity capital markets activity would pick up as soon as there is a window, particularly for quick, overnight follow-on transactions, while convertibles would remain an attractive funding instrument.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
RSS