Equity market round up: Adverse market conditions hit IPO pipeline

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By:
Peter Koh
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Some 190 IPOs seeking to raise $33.1 billion in capital have been postponed or withdrawn across the world so far this year, according to Dealogic.

Globally, this represents an increase of 26% but US IPOs have been particularly hard hit. The value of pulled and withdrawn deals in the US has hit $13.1 billion, a record, and up as much as 146% on last year. Among the most high profile victims was fashion house Tommy Hilfiger, which pulled its plans for a $750 million IPO earlier this year.

The average percentage return for US IPOs one month after listing this year is just 5%, down from 8% for IPOs listed in 2007 year to date.

Companies in the EMEA region have also had their hopes dashed. Deals worth $9.4 billion have so far been postponed or withdrawn. The largest European victim has been Danish power company Dong Energy; it had to delay its $3.1 billion IPO.

The reason cited to 90% of companies for postponing or withdrawing their IPOs was "unfavourable market conditions". Only 61% of companies that withdrew or postponed their IPOs last year cited this reason.

Already-listed European companies have, however, been active capital-raisers this year, asking shareholders for as much as $95.6 billion-worth of new equity through rights issues.

The amount is 141% higher over the same period in 2007 and accounts for 59% of total European ECM volume in 2008, compared with just 19% in 2007 year to date. While some of these deals have been huge successes, such as RBS’s record-breaking $24 billion deal, others, such as those of fellow UK banks HBOS and Bradford & Bingley, have been less so, with investors taking up a very small proportion of their rights.