Potential investors in companies hoping to raise funds on European markets through stock market flotations have been “spooked” by fears over slowing growth in China, according to PwC, one of the largest professional services firms in the world.
“The last two months have been a slightly hair-raising rollercoaster ride – we have watched the fallout from the Chinese stock market turmoil as volatility indices rose to levels not seen since 2011,” Vivienne Maclachlan, PwC’s director of the UK Capital Markets Group, said. “Bankers are asking when is the time to launch.”
The quarterly IPO report came in a week when three flotations were pulled. The Irish billionaire Denis O’Brien dropped the planned $1.7bn (£1.1bn) listing of his telecoms group, Digicel, in New York on Tuesday night, citing market conditions.
In London, Shield Therapeutics cancelled its flotation. “The recent dramatic increase in volatility, which has led to significantly negative market conditions for the biotech and pharma sector, currently doesn’t allow us to launch our IPO,” said Carl Sterritt, chief executive of the pharmaceuticals group. In Germany, Xella, a construction group part-owned by Goldman Sachs, abandoned a €200m (£147m) share issue.
PwC’s figures show the amount raised from flotations in London by the end of the third quarter was already down 43% compared with last year, and the period was the least active of the past three years.
Nevertheless, the market did not appear closed, as it was for a time in 2012, bankers said. “The mid-August volatility arising from data out of China and concerns about the Federal Reserve put the brakes on primary market activity in early September, and volatility has increased, but US & EMEA fundamentals remain positive,” said Klaus Hessberger, joint head of equity capital markets at JP Morgan.
He said there was still demand in the markets at the right price. “The European Central Bank is doing whatever needs to be done, which is helping equities in Europe. There’s also a credible mergers and acquisitions market with companies looking for growth opportunities,” Hessberger said.
In London, the payments processing group Worldpay, which is owned by private equity, is on the way to a flotation that will value it at about £4.5bn excluding debt.
The Hastings motor insurance group is also gathering support for a float in which it aims to raise up to £400m, valuing the company at £1.15bn. This week, banking sources told the Guardian the deal was “covered”, meaning there was enough support from institutions to back it within the announced price range.
In the year to date, €10.1bn has been raised from IPOs in London compared with €17.8bn last year. Deutsche Börse proceeds have been up significantly at €2.8bn compared with €868m last year, according to PwC.
IPOs have generally been profitable for London investors, with 47 of the recently floated companies showing a share price gain and only five showing a loss.
This article was written by David Hellier, for theguardian.com on Wednesday 7th October 2015 18.19 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010