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Global IPO Activity Dropped In Q1 2008

by Amanda Banks, Tax-News.com, London

15 April 2008


In the first quarter of 2008, global initial public offering (IPO) activity decelerated sharply in the wake of the credit crunch and sustained financial turmoil, according to the quarterly Global IPO Update from Ernst & Young.

The number of IPOs fell by 60% in the first quarter of 2008 compared with the fourth quarter of 2007, and was down 38% on the first quarter of 2007.

Globally, USD40.9bn was raised in 236 IPOs in the first quarter of 2008, which was 60% less than the USD102.1bn raised in the previous quarter, despite USD19.6bn raised by Visa Inc., the largest US IPO ever.

Faced with continuous volatility and more stringent valuations, a record 83 companies around the world withdrew their IPOs in the first quarter of 2008, while 24 companies postponed their listings.

“The credit crunch and volatile market conditions have inevitably led to a slowdown in global IPO activity,” explains Gil Forer, Global Director of IPO Initiatives at Ernst & Young.

“However, the capital raised by Visa Inc., China Railway Construction Corp Ltd, and Reliance Power Ltd shows that strong companies are still able to attract interest from investors. While the mature markets are experiencing a slowdown, the emerging markets are still thriving and will continue to drive global IPO activity, as long as they experience robust economic growth,” Forer added.

Three of the top 10 IPOs in the first quarter of 2008 were Chinese, and globally Australia produced the highest number of deals (30), followed by China (29), Japan (22), Canada (20), Poland (17), and India (16).

Overall, US, China, and India led activity by capital raised, and they accounted for 82% of the worldwide total with USD20.8bn, USD8.6bn and USD4bn respectively.

By capital raised, the New York Stock Exchange (NYSE), Hong Kong Stock Exchange (HKSE) and NASDAQ were the top three exchanges respectively this quarter.

Meanwhile, the Australian exchange (ASX) still leads activity among the world’s exchanges by number of listings, ahead of London’s AIM, and New York’s NASDAQ.

Due to the Visa Inc. listing, the financial services sector was by far the dominant industry sector, with over 50% of all capital raised, followed by industrials (16%), and energy and power (14%).

By number of listings, materials companies still led with a 26% market share of IPOs, closely followed by industrials (12%), and financials (11%).

“In 2008, despite the market turbulence, market leading companies with strong business models will continue to be well received by the world’s public markets. We still see a robust IPO pipeline, and the companies that have either withdrawn or postponed their IPOs will revisit going public once market conditions improve,” Forer concluded.

A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, trusts and hedge funds is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp

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