Brexit, US elections, a slowdown in China and US economic concerns have increased levels of uncertainty, but volatile periods are not new and successful IPOs still happen
Even in the most volatile times, IPOs still get done successfully and there are a number of examples of successful listings in tumultuous times. Indeed, in the midst of the 2007/2008 Financial Crisis, Visa went to market with what was then the biggest IPO in US history, raising US$17.9bn for the financial services giant. On the day of launch, in March 2008, shares in the company rose by as much as 28%.
While it may seem to have been a curious time to undertake an IPO, the fact Visa was able to do so successfully highlights the fact that company fundamentals are often more important than market conditions when choosing to list. A strong brand, a recent rate cut and high growth prospects all helped to convince investors to take part.
More recent times have also generated success stories, with many of the larger IPOs launched between Q4 2015 and Q1 2016 emanating from China and Japan, such as Japan Post Bank and China Huarong Asset Management. In Europe, wind turbine maker Senvion first announced it was dropping plans for an IPO in March 2016 because of a lack of investor appetite, only to re-launch a week later, having dropped its target price – from between €20 and €23.5 to a final offer price of €15.75. Realistic pricing was a factor in this case, but so was a determination to list.
The first half of 2016 saw many IPOs pulled, with 17 companies globally shelving their plans to list by the end of Q1 alone – this is the highest proportion of pulled deals (10%) since 2007, according to Dealogic data. The number of deals pulled or still on hold is likely larger, but the complete data is unavailable because confidential filings with the SEC are permitted.
US-based Petco abandoned a listing after receiving an offer from private equity investors, led by TPG. Wayne Farms also announced it was no longer planning to list – for the second time in less than a year – in March 2016.
Yet despite this, quality offerings are still getting traction this year. DONG Energy, 2016’s largest IPO so far, listed on the NASDAQ OMX for US$2.6bn in June, while MGM Growth Properties — the real estate investment trust behind MGM Resorts International — raised over US$1bn after its April listing on the NYSE. And with a bulging IPO backlog, the market could be set for a busy period in the coming months.