New York: The US market for initial public offerings, which had just begun to warm up, could be facing another chill similar to that triggered by the financial crisis.
"We might be moving from people being cautious about IPOs to people not even bothering to look at IPOs because there is so much other stuff to deal with," said Nick Einhorn, an analyst with Connecticut-based Renaissance Capital.
"It's an easy thing to kind of ignore for now while you figure out your approach to the broader market and your broader portfolio," he said.
Three initial public offerings were pulled on Thursday after the Dow Jones industrial average lost nearly 1,000 points in what was its biggest ever intraday point loss.
The dramatic slide was the first real stress test for the IPO market in about 20 months.
"I think it's very possible that we're going to see something similar to 2008 where deal volume for the next three months will be low," said University of Florida finance professor Jay Ritter on Friday.
"It's a global phenomenon, not just the US. The decline in worldwide equity markets and the increase in volatility is putting a heavy chill on the IPO market."
Rattled
Initial public offerings around the world are being cancelled as fear over Greece's worsening debt crisis and the surprise drop in US markets rattle investors. Swire Pacific, which owns a mix of businesses including Cathay Pacific Airways, cancelled the $2.7 billion (Dh9.93 billion) Hong Kong IPO of its property unit on Thursday. Americold Realty Trust — a refrigerated warehouse real estate investment trust backed by billionaire investor Ron Burkle that would have been the largest US share float so far this year — also pulled its downsized $600 million offering, also on Thursday.
Last week Russian fertiliser maker UralChem postponed a $642 million IPO due to market uncertainty. The IPO market is a directional bet on the broader markets, said Chicago-based Harris Private Bank Chief Investment Officer Jack Ablin, who helps oversee $55 billion.
New issues and private equity exits like HCA Inc's proposed $4.6 billion IPO may have to come up with non-IPO strategies in the near term, he said, adding that there will likely be fewer buyers for IPOs in the near term and even more pressure on valuations.
Share sales called off
Hong Kong's IPO market — the biggest in the world last year — has hit the brakes with several companies shelving share sales as the Greek debt crisis pounds global markets.
Swire Properties, a major real estate developer in the city, on Thursday pulled a planned $3.09-billion (Dh11.36 billion) share sale, just two days after Giti Tire, China's largest tyre maker, shelved a US$500-million initial public offering.
On Friday, iron ore producer China Tian Yuan halted its $522-million issue, Dow Jones Newswires reported, citing an unnamed source.
The shelving of the IPOs comes as British insurer Prudential on Wednesday delayed launching a rights issue in London aimed at helping it fund a $35.5-billion takeover of AIA, the Asian arm of troubled US insurer AIG.
Prudential, which remains in talks with Britain's financial sector regulator over the deal, said on Friday that its planned listings on the Hong Kong and Singapore exchanges would also be delayed.
It did not give a revised date for those listings, which will add trading venues without issuing new shares.
The announcement came hours after Hong Kong's benchmark Hang Seng index fell Friday to its lowest level in three months, closing at 19,920.29 as investors fretted about the spectre of a European fiscal implosion.
One company that has gone ahead with plans to list is French cosmetics maker L'Occitane, which saw its share price dive 4.51 per cent to HK$14.40 ($1.85 US) when it debuted in Hong Kong on Friday after raising $704 million US in its IPO.
— AFP
