A growing number of U.S. companies such as
Facebook and Carlyle Group lining up to go public and a smattering of U.S. and
European secondary offerings are once again giving investment bankers hope that
the moribund equity capital markets may finally be waking up.
The
S&P 500 has risen 12 percent in the first quarter and the market volatility
tracker VIX is at five-year lows as fears about the U.S. economy and the euro
zone debt crisis ease, prompting more companies to tap the public markets after
being effectively shut out for the last few months.
Global
equity fundraising, including IPOs and secondary offerings, tumbled 25.8
percent in the first quarter of 2012 to $150.2 billion, compared with the same
period in 2011, Thomson Reuters data shows.
Global
IPO proceeds, which reached $17.4 billion in 173 issues, sank to their lowest
volume since the second quarter of 2009, the data shows.
Many
risks to a recovery still persist, such as the impact of slowing growth in
China on Asian markets, but bankers said they expect volumes at least in the
United States to improve over the rest of the year.
"The
IPO market had been very slow to get out of the gate in the first half of the quarter,
but the last half has really been catching up," said David Hermer, head of
Americas syndicate at Credit Suisse (CSGN.VX). "A number of recent
landmark deals will materially change the landscape, in a positive way."
Technology
deals, which captured nearly a third of all U.S. IPOs during the quarter, are
expected to lead the market again, as investors pile into sectors like cloud
computing, social media and mobile.
Bankers
said even European companies, particularly those with a tech focus, are thinking
about U.S. listings.
British
vacuum technology firm Edwards, which pulled a London float last year due to
choppy markets, and German high-tech lighting company Novaled this month filed
with U.S. regulators for IPOs.
In a
sign that the recovery might be more broad-based, companies in other sectors
are beginning to test the markets as well. Private equity giant Carlyle Group
(CG.O), crafts retailer Michaels Stores MCHST.UL and real estate investment
trust Empire State Realty Trust (ESB.N) are all planning IPOs.
"You're
going to see more industrial companies coming out, many with higher levels of
financial leverage, along with technology, energy and consumer retail,"
said James Palmer, New York-based managing director of equity capital markets
at UBS AG (UBSN.VX). "You'll see a much broader spectrum in both the
quality and type of product."
A big
chunk of the activity is expected to come from private equity firms, as they
look to exit investments, many of which date back to the buyout boom of
2006-2007, and sell down stakes through follow-on offerings.
"Sponsors
are going to play an important role in overall capital formation," said
Phil Drury, co-head of equity capital markets in the Americas at Citigroup Inc
(C.N).
For
banks, more activity means more underwriting fees. In the first quarter,
Citigroup topped the global ranking of equity underwriters with 76 deals
accounting for proceeds of $14.3 billion, up from No. 7 in the first quarter of
2011.
Goldman
Sachs (GS.N) came in at No. 2, down from its No. 1 slot in the prior year, and
JPMorgan Chase & Co (JPM.N) took No. 3, up from its No. 5 position.
Guosen
Securities, a Chinese investment bank, was the leader for global IPOs, raising
$1.4 billion for clients, thanks to a number of solo deals like a $337.7 million
IPO for computer knitting machine producer Ningbo Cixing Co and a $249.8
million offering for silicon maker Xi'an LONGi Silicon Materials.
"The
IPO market has been slow to start, but the stars are finally starting to
align," said Brian Reilly, head of U.S. equity capital markets at Barclays
(BARC.L).
TENTATIVE RECOVERY
While
the level of activity is expected to rebound from the lows seen over the last
six months, bankers said the global markets are far from getting back to
normal. Risks such as worries about a fragile global economy, Europe's debt
problems and escalating tensions with Iran continue to add uncertainty and
weigh down the markets.
Investors'
concerns over a slowdown in China's economy put a damper on the Asia-Pacific
market, which had dominated equity capital market issuance as the West grappled
with the aftermath of the financial crisis of 2008.
"The
problems are much closer to home," said Rupert Mitchell, head of equity
syndication for Asia-Pacific at Citigroup. "The world is worried about
China right now, where growth is going to be more measured this year."
Activity
in the region tumbled 37 percent in the first quarter from a year earlier to
$36.7 billion, the lowest quarterly volume since the second quarter of 2009.
IPOs were down 75 percent, accounting for most of the weakness in the beginning
of the year.
The
major listings expected in Asia this year include the $1 billion IPO by
high-end jeweler Graff Diamonds and $1.5 billion offering by Haitong Securities
in Hong Kong; the $1 billion IPO by football club Manchester United MNU.UL in
Singapore; and nearly $4 billion from two deals in Malaysia: Felda Global
Ventures and healthcare company Parkway Pantai.
In
Europe, German chemicals maker Evonik and insurance group Talanx and Italian
aero-engine parts maker Avio are among those seen as most likely to launch
their IPOs in the first half. The sale of the Russian central bank's stake in
Sberbank (SBER.MM), worth around $6 billion, could also be launched in
mid-April.
But
overall companies are likely to wait at least until the second half of the year
before tapping the markets, bankers said.
"The
market in Europe is open and investors are engaged, but every deal will be
evaluated on its own merit and on a case-by-case basis," said Viswas
Raghavan, global head of equity capital markets at JPMorgan.
Olivia
Oran, Kylie MacLellan and Elzio Barreto
Reuters
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com
No comments:
Post a Comment