New figures show
Political concerns and market volatility have once again dampened the IPO market in the first half of 2018, mainly as a result of lower capital raising in Asia Pacific and EMEA. A total of 676 listings have taken place so far in H1 2018, down 19 per cent on the comparable period last year. The value of listings has also fallen 15 per cent to USD 90 billion.
The London market seems to be bearing the brunt of concerns about Brexit and wider threats to globalisation and free trade, with both the value and volume of deals recorded there dropping. Capital raising fell by 50 per cent for the first half of 2018 to USD 4.6 billion while the number of issues fell by 9 per cent to 32.
Adam Farlow, London partner and head of capital markets in EMEA, says: “Brexit remains the thorn in the side for the UK IPO market with figures falling as the uncertainty continues, and many dual track transactions have taken the M&A route rather than list. Despite this, however, we anticipate a strong backlog of IPO activity to take place in the second half of the year as issuers continue to be attracted by the London market. Success breeds success – and off the back of a number of expected deals, even more issuers will find their home in the London market. An important subset of those will be helped along by the new FCA rule changes aimed at attracting sovereign-controlled companies such as Saudi Aramco.”
Globally, worries around geopolitics – in particular US President Trump’s protectionist policies, as well as a lack of progress around Brexit negotiations and prolonged political uncertainty in Italy – weighed on investors’ minds and dented the headline numbers. Market volatility peaked early in the year to levels not seen in 2017, adding to the challenge of finding the right time to launch an IPO.
However, cross-border IPOs significantly outperformed. A surge in capital-raising in North America’s deep capital markets led the charge, with foreign issuers seemingly perfectly happy to list in the US despite protectionist rhetoric and just under half of the billion dollar IPOs successfully launched in the US.
Issuers raised more than USD 16.6 billion, an increase of around 15 per cent on the same time last year. The number of cross-border deals also climbed, up 18 per cent to 85, with three of the top ten cross-border IPOs debuting on North America exchanges. While the US proved attractive to 13 Chinese cross-border issuers, Hong Kong continues to be favoured with 18 deals. This resulted in Baker McKenzie’s Cross-border Index value rising to 17.4 from 13.2 in H1 2017, just below the highest recorded of 18.7 in H1 2014.
“While domestic issuers are adopting a ‘wait and see’ approach in light of various political issues, fears over globalisation going backwards and economic nationalism haven’t reached the cross-border market,” said Koen Vanhaerents, global head of capital markets at Baker McKenzie. “To see cross-border activity going up shows a good degree of health in global equity markets, despite quieter domestic markets.”