Global IPO proceeds dropped by almost 65% (to €12.5bn) year-on-year, the slowest start of a year since Q1 2009 (€1.5bn, 69 IPOs) as IPO and debt markets battled strong headwinds created by the historically low oil prices, the slowdown in the Chinese economy and continuing uncertainties around US interest rates.
IPO activity in Europe fell back to the levels seen in early 2013 and Q1 2016 saw a mere 50 IPOs raising €3.5bn in the first quarter. Only three exchanges hosted IPOs raising more than €50m (London, OMX and Deutsche Börse), compared to nine exchanges in Q1 2015. Europe is also still waiting for its first €1bn+ IPO of 2016, after 2015 was dominated by 14 mega IPOs.
London was not spared from the general global IPO market maladies, experiencing a 50% drop in activity from already subdued levels at the end of last year. Yet the London exchanges continued to be the most active in Europe, with 18 IPOs raising €2.3bn (or £1.8bn), and therefore accounting for circa two-thirds of total European proceeds. London was also the second largest exchange in terms of IPO proceeds globally, perhaps a reflection of the US market troubles. Healthy signs also came from AIM as the junior market managed to raise €301m (or £231m) year-to-date, as smaller deals came to market.
“This quarter has proven to be challenging for IPO activity, but that’s not to say we don’t see a diverse pipeline for the end of 2016 and early 2017.”
Peter D’hondt, Partner at PwC Belgium, commented: “Despite challenging market conditions, companies with strong equity stories and good management teams have successfully completed their IPOs. The pipeline of companies preparing for IPOs towards the end of 2016 and into 2017 looks generally healthy, but as the IPO window begins to close as we get closer to the EU referendum and traditional summer hiatus, we expect that there will be increased volatility where people won't want to price IPOs.”
Market conditions also led to an increase in the number of postponed deals with companies facing market volatility and challenging valuation discussions compared to their listed peers. At least nine European IPOs were publicly postponed or withdrawn in the first quarter (16% of all deals), compared to five (6%) in Q1 2015 and trade sales continued to divert owners from the listing route.
"We expect that candidates in the financial sector, mainland European privatisations and strategic demergers will contribute their fair share to overall annual proceeds. But with the EU referendum looming, uncertainties still remain, and we do not expect to reach the €10bn mark before the summer break and this reflects a return to the levels seen in the first half of 2013, before the recent boom of the last two years.”