A couple of hefty share listings in Europe and the return of AB InBev’s Asian unit float in the third quarter of 2019 brought some hope to a global IPO market battered by political volatility and downbeat global growth expectations.
Investors’ nervous mood was highlighted in the third quarter by the cancellation of WeWork’s planned US$20-billion initial public offering in the United States, while a poor debut for fitness startup Peleton Interactive Inc. has added to the gloom.
Fund raising through stock markets globally is down by nearly 18 per cent in the first three quarters of 2019 compared with the same period a year ago, its lowest since 2012, Refinitiv data showed.
This was partly due to the steep fall in Asian markets as protests rumbled on in Hong Kong and trade tensions between China and the United States simmered in the background.
Asia-Pacific equity capital markets (ECM) volumes were down 22 per cent overall to US$147.8-billion equivalent over the first three quarters versus the same period last year, particularly hurt by a 40-per-cent fall in IPOs to US$40.88-billion. Chinese IPOs alone halved in volume to US$26.7-billion.
But with Belgian brewing giant Anheuser-Busch InBev SA/NV reviving the Hong Kong listing of its Asian Budweiser Brewing Co. APAC Ltd. to raise around US$5-billion last week, the mood has turned a little more upbeat.
“The markets may be a little more volatile, but that doesn’t change the appetite for companies operating on strong fundamentals in China that are considering IPOs,” said Alex Abagian, co-head of Asia Pacific ECM at Morgan Stanley.
“These are good assets, though maybe they will have to be a little more sensitive about price and valuation considering the extra market volatility,” he said.
Similarly in Europe, bankers said they were feeling a little better about life after German tech firm TeamViewer GmbH and Swedish buyout group EQT Partners raised an overall €3.4-billion (US$3.7-billion).
“I feel constructive about the rest of the year. We have already had some names reopen the market postsummer and there is a functioning market for growth stories of size,” said James Fleming, co-head of ECM for Europe, Middle and Africa at Citigroup Inc.
“That said, there’s no denying it has been a tough year for EMEA ECM, with volumes at historically trough levels.”
European ECM proceeds are at their lowest level since 2012 in the first three quarters of the year, down 23 per cent to US$88.6-billion equivalent, while IPO volumes are down a whopping 40 per cent to around US$17-billion.
Hopes that Saudi Aramco could blow this figure out of the water in the fourth quarter with the biggest deal of the year – and possibly the biggest IPO ever – have faded with sources saying the listing may not happen this year.
MORE ROBUST U.S. MARKET
While ECM bankers in the Asia-Pacific and EMEA region have had a relatively lean time so far this year, their counterparts in the Americas have fared better, with overall volumes down only 6 per cent at US$203-billion.
In terms of IPOs, volumes in the United States were actually up 5 per cent in the first three quarters of the year at US$41.66-billion compared with the same period last year, helped by Uber’s US$8.1-billion May listing, the year’s largest IPO.
But there have also been some problems.
Unicorns making their debut on the U.S. stock market are getting a rough ride, especially if they are losing money, casting a shadow over the IPO calendar for the rest of the year.
Loss-making teeth alignment company SmileDirectClub Inc. was the first U.S. IPO in three years to price above its target range and close down on its first day, according to research firm Renaissance Capital.
It was a similar story for fitness startup Peloton Interactive Inc., which closed down 11.2 per cent in its market debut after having priced at the top of its target range.