Forex Marketz Daily Forex News – Fully Markets Update
IPO market: A global dearth of new listings
LONDON — Startups and young companies around the world are thinking twice about going public amid uncertainty in global financial markets, China’s recent stock market crash and with an array of suitors waiting to give them cash. As a result, money raised through initial public offerings during the July to September period plunged to a level not seen in more than three years.
An advertising board showing a stone lion is seen near an entrance to the China Securities Regulatory Commission headquarters n Beijing on Sept. 7. The watchdog has a list of approximately 600 IPO candidates. © Reuters
An advertising board showing a stone lion is seen near an entrance to the China Securities Regulatory Commission headquarters n Beijing on Sept. 7. The watchdog has a list of approximately 600 IPO candidates. © Reuters
According to financial research company Dealogic, the amount of funds raised through IPOs totaled $20.2 billion during the July to September period, down about 70% quarter-on-quarter as well as on the year and the lowest level since the January to March period of 2012.
The number of IPOs fell in the U.S., Europe and Asia. In all, 197 companies were newly listed, a 50% drop from the April to June period.
One reason is that startups are just as nervous about going public as investors are about putting money into stocks these days.
Even the U.S. Federal Reserve, which was widely expected to raise interest rates in September, got cold feet.
According to the U.K.-based accounting firm Ernst & Young, companies receiving money from venture capitalists and other investment funds during the quarter saw a 90% quarter-on-quarter drop in the amount of funds raised. European companies took a particularly big hit.
Globally, more than 60 businesses canceled or postponed IPOs during the quarter, far surpassing the 42 that did so a year earlier.
One big reason is that the Chinese government has suspended IPO activity as part of its efforts to stabilize stock prices. The China Securities Regulatory Commission has a list of approximately 600 IPO candidates.
Chinese companies had been driving global IPO growth.
With the IPO market in the doldrums, companies looking to go public in the October to December period could rethink their plans.
Italian postal service company Poste Italiane is looking at a 4 billion-euro ($4.48 billion) listing, and three group companies of Japan Post Holdings are also poised to go public during the quarter.
Another reason there are fewer IPOs these days is choice. Overall, companies are in a good fund-raising environment, said Maria Pinelli, global vice chair of strategic growth markets at Ernst & Young. One way a young company can get cash without going public is to be bought. And as it turns out, a lot of venture companies are quite happy to be gobbled up by large corporations.
