New York: The epicenter of global initial public offering activity has shifted east to China as waves of volatility and slumping stock markets have sent virtually all sizable listings in the US into limbo.
Stock listings in Asia have raised $104 billion this year, accounting for a record 68 per cent of global volume, data compiled by Bloomberg show. By contrast, US IPOs represent just 14 per cent of the $153 billion fetched globally, the lowest ever for what has traditionally been the busiest listings market in the world.
The strong Asian showing is mostly down to Chinese IPOs, which have continued to come thick and fast even as rising interest rates and the prospect of a recession put a lid on first-time share sales in most major markets. Of the 10 largest listings globally this year, six were from Chinese companies either on mainland exchanges or in Hong Kong, the data show.
“In 2022, as the world deals with inflation and global tensions, the IPO epicenter in terms of volume has shifted east,” said James Wang, co-head of ECM at Goldman Sachs Group Inc, in Asia ex-Japan. “The continuity of such appears sustainable for the time being given some sizable Hong Kong IPOs are lined up to potentially test markets before year end.”
In the US, which accounted for more than half of last year’s record $657 billion of IPO proceeds, the market has come to a sudden halt as inflation fears and heightened volatility keep valuations depressed and cause investors to steer clear of the high-growth companies that typically dominate IPO activity.
The unwelcoming market conditions have forced highly anticipated listings like Mobileye NV and Chobani to be pushed back or scrapped altogether. Until this week, there had been just one billion-dollar plus offering in New York this year, that of private equity firm TPG. In Asia there have been 12, while the Middle East has had four.
Even with a preliminary agreement on the auditing issue in the US, there are doubts that the flow of Chinese companies to New York - they have raised $122 billion since the start of the century - will return to previous levels given ongoing tensions and increasing alternatives.
“Chinese issuers now have more options when they want offshore funding,” said Mandy Zhu, head of China, global banking at UBS. “Apart from the traditional HK and US listings, they can do an A-share IPO first.” Following that, the companies could tap European exchanges through a stock link between China and Europe, she said.
Indeed, Europe is becoming a more appealing listing venue for Chinese firms than the US. Some $2.3 billion has been raised by mainland firms in Europe this year through the newly expanded stock link between China and exchanges in Germany, Switzerland and the UK, helping prop up dire listing volumes in the continent.
There is, of course, a mammoth deal around the corner in Europe, which could double the region’s current IPO proceeds of $9.8 billion in one fell swoop. Porsche could kick off an offering as soon as next week that values the iconic sports-car maker at as much as 85 billion euros ($85 billion), Bloomberg News has reported.
And there are green shoots in the US as well. American International Group Inc.’s life and retirement unit raised $1.68 billion this week in the biggest US IPO this year after pricing its shares at the bottom of a marketed range. It’s being closely watched as a harbinger of better days to come, although it ended its first day of trading below the issue price.