The S&P 500 is down about 7.5% year to date, the Dow Jones EuroStoxx 50 17.5% and the Hang Seng 25%.
Despite the extreme market conditions, however, investors rolled out the welcome mat to greet record-breaking deals from Visa, China Railway Construction Company (CRCC) and Société Générale.
In Asia, CRCC’s $5.4 billion IPO attracted more than $68 billion-worth of orders from retail investors alone, surpassing the $57.4 billion record set by Chinese internet portal Alibaba last November. The institutional portion of the book was more than 60 times covered and several investors came in with single orders larger than $1 billion.
Investors are bullish on CRCC’s prospects because of the Chinese government’s ambitious infrastructure investment plans, which include the construction of 55 new railway lines in 14 cities over the next few years.
Payments network operator Visa, which launched its IPO hot on the heels of Bear Stearns’ dramatic demise, broke the record for the largest ever US IPO, raising $17.9 billion and pricing above its initial price range. Visa’s IPO could be close to twice the size of previous record holder AT&T Wireless, which floated in 2000, if the company decides to float its overallotment. Visa’s IPO is the third largest ever, behind Chinese bank ICBC’s $21.93 billion deal in October 2006 and Japanese mobile company NTT Mobile Communications Network’s debut in October 1998.
A boon
As well as being a success for the company itself, Visa’s IPO is a boon for its shareholders, all of whom are banks. JPMorgan Chase, the largest shareholder, stands to gain an estimated $1.2 billion, while Bank of America and Citi are expected to make about $600 million and $300 million respectively.
In Europe, Société Générale’s €5.5 billion rights issue added to the list of conspicuous successes. Société Générale’s capital-raising was almost twice covered, attracting €10.2 billion of demand, helped by a generous discount and speculation that rival BNP Paribas was preparing a bid.
"Volatility is our worst enemy," says Louise Wilson, head of European equity capital markets at UBS, "but the market never shuts completely, it just gets more and more price sensitive and selective. In the current market, environment investors want only the highest-quality offerings, where quality is some combination of scale, ie, liquidity, and ‘blue chip’ status with leading positions in their markets. The recent success of one or two large transactions despite tough conditions is evidence of that."
The success of these recent large deals as well as a notable number of transactions from the Middle East has helped raise global IPO volumes so far this year to $34.2 billion, a figure above that raised over the same period in 2007, even though the number of deals has fallen significantly, from 298 to 175.