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IPOs losing appeal across the board as withdrawals hit 10-year high

THE global market for initial public offerings (IPOs) of stock, which was hot in late 2010, has cooled.

THE global market for initial public offerings (IPOs) of stock, which was hot in late 2010, has cooled.

In just a few months, the market has gone from raising record amounts of money to reaching a 10-year high in the number of proposed offerings withdrawn because there was no market.

During this year's second quarter, 98 offerings - which had been projected to raise $US21 billion ($19.5 billion) - were withdrawn, according to calculations by Dealogic.

The number of cancelled offerings was the highest since 129 were stopped in the fourth quarter of 2000, as it became clear that the technology bubble had burst.

The recent boom in IPOs was spread much wider than the one that ended in 2000. The earlier boom was concentrated in the US but the latest included many more companies from booming developing markets, particularly in China.

In the fourth quarter of 1999, the total amount raised by IPOs hit $US66.1 billion, which was a record then. More than three-quarters of that was raised in the US market and most of it was for technology companies. In the final quarter of 2010, $US127 billion was raised, and less than one-quarter of that was raised by offerings in the US.

In the latest quarter, the total raised was about half the level of the fourth quarter of 2010, although the decline in the number of completed offerings, to 406 from 516, was not as sharp.

The market for IPOs virtually collapsed in 2002 and 2003 but then began to recover as sharemarkets rose and many countries reported strong growth. Strong volumes of foreign offerings meant the IPO market had become strong before the financial crisis killed it in 2008 and 2009.

The volume of withdrawn offerings provides a clear indication of rapid changes in markets. Those are deals that underwriters thought they could sell. They went to the expense of preparing offering documents but then were unable to sell, at least at prices acceptable to the companies.

The failed offerings cover the spectrum, both geographically and in the nature of the business. In June, three proposed IPOs that had been expected to yield more than $US1 billion each were withdrawn.

One was a Hong Kong company that mines iron ore in Australia, another a French company that makes glass containers and the third an Indian company that builds and leases communications towers for mobile telephone service providers.

Unlike the collapse in 2000, the latest decline does not follow a widespread collapse in the prices of previously hot new offerings. During the final three months of 2010, when the total amount raised by new offerings set a record, Dealogic counted nine offerings that doubled in price on the first day of trading.

Last week, all of those stocks were still trading above the offering price, although only two - Youku.com, a Chinese internet television company, and TPK Holding, a Taiwanese maker of screens for smartphones and other devices - traded for more than they did on the first day.


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