IPOs slump as global Economy slows
Date: 07-04-2008
Source: MarketWatch
The number of European initial public offerings slumped in the first few months of 2008 as fragile markets deteriorated further and investors became more cautious about committing their cash, according to a report by PricewaterhouseCoopers.
The report found the total offering value of European IPOs in the first quarter fell more than 80% to 1.99 billion euros ($3.12 billion) and the number of offerings roughly halved to 70 from 139 a year earlier.
The number of U.S. listings also fell sharply, though the amount raised rose due to the record-breaking $17.9 billion IPO of Visa Inc. (V, US).
On U.S. exchanges, the total number of IPOs in the first quarter fell to 27 from 64 a year earlier. The total value of those IPOs, however, jumped to around $27.3 billion from $14.4 billion due to the Visa flotation.
"This has been a disappointing start to the year for IPO activity across Europe and this is a strong indication of the poor health of capital markets more broadly," said Tom Troubridge, head of PwC's capital markets group.
Traditionally, listing activity ramps up through the first quarter as companies finalize their annual accounts before going ahead with an IPO. But this year, IPOs tailed-off through the quarter and were lowest in March, illustrating the continued deterioration in markets, PwC found.
The biggest decline in listings was seen in the financial services and real estate sectors, which have been among the hardest hit companies as the credit crisis led firms to slash earnings and as commercial and residential property prices have dropped.
In financial services there were four European IPOs, down from 18 in the first quarter of 2007 and in real estate there were two flotations, down from 10 a year earlier, the report found.
The immediate outlook also remains muted, PwC said.
"The market conditions are difficult for new IPOs with investors reluctant to invest against a difficult equity market backdrop and this is causing companies which had been set to float to postpone their plans," said Richard Weaver, a partner in the company's capital markets group.
"The outlook for the next quarter is pretty bleak as we do not expect many companies in the pipeline to attempt an IPO before the third quarter of this year," Weaver added.
.jpg)
