Daily Management Review

After Political Uncertainty Held Back Activity, Global IPOs Expected To 'Take Off' In 2017


09/28/2016




After Political Uncertainty Held Back Activity, Global IPOs Expected To 'Take Off' In 2017
A new report on the prospects of Initial Public Offerings (IPO) estimates that there would be a strong bounce-back in activity in the market in 2017 even as the market for initial public offerings has had a year it would rather forget as it tried to deal with global political uncertainty.
 
"Although global IPO activity in 2016 will likely lag behind 2015 levels, the outlook for 2017 is positive due to improving economic fundamentals, high valuations and lower volatility which will support IPO sentiment," a new report by audit firm EY said on Wednesday.
 
In the company's quarterly EY Global IPO Trends report, it was noted that the trends in the market point to a situation in 2017 that would surpass the activity in 2015, even while it says that a return to the record levels of activity in 2014 "may be a stretch." Primarily due to the fact that the options on alternative financing remains limited, IPO activity in emerging markets continues to gather pace, the report said.
 
According to EY, with the equity markets in China having stabilized now, the country's market regulator now looks to clear the pipeline by approving bigger deals and hence the second largest economy of the world is also expected to see a higher levels of flotations next year.
 
"In developed markets, some companies have hit the pause button and are refocusing their energies on preparing for 2017," the report added. 
 
The Postal Savings Bank of China (PSBC) floated its IPO on Wednesday, the world's largest initial public offering in two years and the report was published on the same day as the Chinese bank IPO was floated. And for the company, the shares were only narrowly higher than their IPO price, which Reuters reported was itself at the bottom of its marketing range and this perhaps underlining the weak sentiment for IPOs that was noted by EY report.
 
The worst impacted area is the cross border listings of IPOs. The report of EY noted that in this aspect the IPO market was at its historic lows. Cross border listings are the listing of a company's shares on a different exchange than its original. The total proceeds from such deal globally fell by 39 percent between the months of January and September this year, compared to the same figures a year earlier. The total volumes of the deals in the same period dropped by 23 percent compared to 2015.
Most U.S. private companies and financial investors were adopting a "wait-and-see strategy," said Jackie Kelley, EY Americas IPO leader.
 
"With levels of private capital still at all-time highs and multi-tracking baked into corporate strategy, business leaders and financial sponsors are focused on getting set for 2017 when political and interest rate uncertainty are likely resolved by year-end and conditions will be supportive," she said in the press release.
 
(Source:www.cnbc.com) 






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