Emerging Markets Drive IPO Activity In Second Quarter Of 2008

by Jason Gorringe, Tax-News.com, London

14 July 2008

Global initial public offering (IPO) activity has fallen significantly year-on-year but was relatively stable in the second quarter of 2008 compared with the first three months of the year, according to the quarterly Global IPO update from Ernst & Young.

In the second quarter of 2008, a total of 258 IPOs worldwide raised USD37.4bn in capital.

This compares with 247 IPOs worth USD41.2bn in the prior quarter.

However, compared with the same quarter in 2007 total capital raised fell by 59% (from USD90.4bn to USD37.4bn) and the number of deals more than halved (from 567 to 258).

In addition, data from Dealogic shows that more IPOs have been postponed or withdrawn in the first six months of 2008 (177) than in 2007 overall (169).

Emerging markets continued to drive activity in the second quarter with China Including Hong Kong leading the way in both value (USD6.2bn) and volume (56 IPOs).

Seven of the top 10 and 15 of the top 20 IPOs by capital raised were from emerging markets.

Four countries accounted for half of the capital raised globally: China (USD6.2bn); Brazil (USD4.6bn); United States (USD4.3bn); and Saudi Arabia (USD3.4bn). The most active countries in terms of number of deals were China (56); Poland (21); and Australia, South Korea and India (17).

Gil Forer, Global Director of IPO initiatives at Ernst & Young, explained:

“Emerging markets are replenishing the deal pipeline at a time when IPO activity in mature markets is decreasing due to the continuous impact of the credit crunch, high market volatility and economic slowdown. In the second quarter of this year, emerging markets accounted for 76% of capital raised - reflecting confidence in continued economic growth.”

Leading industries by number of deals include materials, industrials, and technology. By capital raised, the dominant sectors were energy and power, materials, and financial.

The top three IPOs by capital raised were OGX Petroleo e Gas Participacoes (Brazil); Al Inma Bank (Saudi Arabia); and New World Resources BV (Czech Republic). The most active exchanges this quarter were the Australian exchange (ASX), AIM and the Hong Kong Stock Exchange (HKEx). By capital raised the top three exchanges were the London Stock Exchange (LSE), New York Stock Exchange (NYSE) and Euronext.

“The fact that postponements and cancellations have risen so sharply reflects the current climate of economic uncertainty and it is difficult to see this landscape changing in the next two quarters at least,” Forer added, going on to conclude:

“But while global activity is slowing down, the IPO pipeline remains strong and it is likely that those who have withdrawn or postponed IPOs will revisit their plans once market conditions improve.”

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