The Price of a Storm of Uncertainty: US$40 billion and rising
Our prediction - that uncertainty, which made for a poor end to 2015, would continue to depress activity in 2016, has come to pass. Temporary issues have been driving sentiment in the year to date, with volatility more political than genuinely economic and markets on hold rather than in deep distress.
Koen Vanhaerents, chair of Baker McKenzie's Global Capital Markets Practice Group
The global IPO market finally succumbed to negative sentiment in the first half of 2016. While cross-border listings have outperformed domestic listings in every first half since 2013 in terms of market share by value, deals of both types fell dramatically in the first half of this year. They fell more or less in tandem, with domestic deals marginally less affected as the issuers brave enough to come to market sought safety in home markets. The global cross-border index fell to 22.2, remaining above the lowest point recorded in the index in 2013.
Cross-border deals fell 72% by value and 55% by volume, while domestic deals were down 56% by value and 45% by volume, reflecting both the flight to safety and the fact that smaller deals tend to be domestic. Issuers in total completed just 167 IPOs worldwide, raising just over US$25 billion, the smallest total by some distance since this index was created in 2011. This is US$40 billion less than H1 2015 and 52% less than H1 2012, which was the worst first half since 2011 until now.
Negative sentiment is responsible for these exceptionally low levels of market activity, driven by a convergence of predominantly political event-driven uncertainty, now exacerbated by the United Kingdom's decision to leave the European Union.
The regional perspective
Uncertainty has once again characterised the North American IPO market, which remained muted particularly during the ﬁrst quarter, signalling the region’s slowest performance since 2009. The scarcity of IPOs can be attributed to several factors including mark-downs of private company valuations, market volatility and the drop in energy prices.
View our North America infographic
Europe, Middle East & Africa
More than any other region, the first half of the year is disconnected from the second following the UK’s decision to leave the EU. After an initial flurry of London listings before April, the market was quiet in the run-up to the UK referendum on EU membership, but with expectations for a strong second half of the year following a “remain” vote. Things did not go to plan, and the uncertainty and renewed market volatility resulting from a Brexit vote is expected to have severe consequences for EMEA markets in the months to come.
View our Europe, Middle East & Africa infographic
After three years of growth, cross-border IPO value in Asia Pacific declined by 68.2% to US$4.96 billion, as a result of lower Chinese IPO volume. Overall, the regional market appears likely to improve in the second half of the year, with Line Corp.’s planned IPO in the Tokyo and New York stock exchanges expected to raise as much as US$1.1 billion in July.
View our Asia Pacific infographic
There were no cross-border IPOs within Latin America in the first half of 2016, and one domestic IPO, representing a 74% year-on-year decline in capital raised. This is attributed to the continued weakness of markets in the region. The sole domestic IPO was a Mexican real estate company raising just over US$100 million. Cross-border issuers continue to turn to New York, with Argentina’s Grupo-Supervielle the sole H1 listing raising over US$320 million on the NYSE.