Initial public offerings (IPOs) this year slumped to the lowest level since the financial crisis as signs of an economic slowdown and Facebook Inc’s disappointing debut curbed demand and prompted companies to push back sales.
IPOs have raised US$112 billion worldwide this year, the lowest figure since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year’s level, while concern about China’s economy helped cut proceeds in Asia by almost half. US offerings raised US$41 billion, little changed from last year, as Facebook’s IPO spurred a month-long drought in US deals.
With the possibility of US$600 billion in US spending cuts and tax increases that could cause another recession also weighing on the IPO market this year, the global backlog of potential offerings has now swelled to the largest year-end size since 2007, data compiled by Bloomberg and Ipreo show.
That could set the stage for a rebound if lawmakers avert the US’ “fiscal cliff,” according to Credit Suisse Group AG and Barclays Plc, with companies from China Petrochemical Corp to ING Groep NV poised to potentially move ahead with offerings.
“A lot of people have been very selective,” head of equities syndicate at Barclays Joe Castle said at a New York briefing this month. “If we see some deals go out early in the year that go well and trade well, then it feeds on itself for more volume to come out in the US and on a global basis.”
In the fourth quarter, IPOs in western Europe surged more than fivefold from a year earlier to US$5.71 billion, and US initial offerings increased 15 percent to US$8.8 billion, data compiled by Bloomberg show. First-time share sales in Asia fell by 46 percent to US$10.9 billion, the data show.
Globally, IPOs this quarter edged up to about US$32.4 billion from US$29.5 billion year-on-year.
The annual global IPO tally declined for a second straight year as Europe slipped back into recession, cutting the amount raised in the region by about two-thirds to US$9.91 billion.
In Asia, the biggest region for IPOs, proceeds fell by 43 percent to US$46.7 billion. The US total barely eclipsed last year’s mark, even including the US$16 billion debut of Facebook, the biggest technology IPO on record.
After Facebook’s stock fell as much as 32 percent in the first three weeks after its IPO, companies such as Party City Holdings Inc and American International Group Inc’s airplane-leasing unit pulled planned offerings in favor of private sales.