Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

Continue Reading

Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading

Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading

Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading

Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading

Categorized | Financial

US IPO market running on empty in 2016


Posted on May 31, 2016

epa03936073 An employee walks past a logo of Alibaba Group at its new base on the outskirts of Hangzhou, Zhejiang province, China, 04 November 2013. Last month, nearly 10,000 employees finished to move into the new base called 'Taobao City.' Alibaba Group's plans to revolutionise China's retail industry, investing 16 billion US dollars in logistics and support by 2020, will open up China's vast interior and bring access to hundreds of millions of potential new customers. China's e-commerce market is expected to leapfrog that of the United States this year to become the world's largest by total customer spending, management consultancy firm Bain & Company says, and could account for half of all Chinese retail spending within a decade. EPA/JEFF LEE©EPA

Where’s Alibaba when you need it? Two years ago, the US listings market was abuzz about an impending initial public offering from the Chinese ecommerce juggernaut that would go on to be the largest ever.

Now, with the midyear mark approaching and no marquee deals anywhere close to Alibaba’s size in sight, the US IPO market is on track for its slowest year since the financial crisis.

    Brutal selling from almost the opening bell of 2016 cast a pall on the listings market. Issuance all but dried up in the first quarter. It has begun to recover over the past two months, with US Foods, the second largest IPO this year after raising more than $1bn, rising sharply on its debut, last week. A ‘unicorn’ — private tech start-ups that have achieved valuations of more than $1bn — also filed its paperwork with regulators last week.

    Even with these hopeful signs and the S&P 500 now in positive territory for the year, the outlook for the key summer period remains difficult. A backdrop of a possible Brexit vote, uncertainty about an interest rate rise from the Federal Reserve and the US presidential election all pose challenges for bankers trying to make up for a weak first half.

    “Everyone across the street has a huge backlog of diverse names — healthcare, industrials, financials and tech — but I don’t see it as the floodgates opening and we will see massive turnround,” says Jill Ford, Americas head of the equity syndicate at Credit Suisse. “While everyone wants to become active, the practicalities of it mean there are not that many windows.”

    Unlike bond deals that can launch and price potentially in the same day or week, IPOs take some planning. Deals have to be vetted by regulators, and companies embark on a marketing blitz to pitch investors in different cities, all of which takes time.

    Companies considering pushing ahead now risk pricing deals in the teeth of a monetary policy meeting from the Fed and Britain’s vote on whether to stay in the EU — both in June. July is not much better, with the back-to-back conventions for the Republican and Democrat parties.

    In late August, the market typically slows as participants head out on holiday and there will be only a small window when they return before the political uncertainty generated by the unpredictable US presidential election intensifies before November’s vote.

    “As we get to the fourth quarter, which will have the election, there will be lots of reasons not to put risk on,” says Mark Hantho, global head of equity capital markets at Deutsche Bank. “The global backdrop makes it more difficult to take companies public.”

    This year 34 deals have priced, raising $7.2bn, the worst showing since 2009, according to Dealogic.

    The mood among the buyers of IPOs also isn’t that cheery. Hedge funds have underperformed and even contrarian styles of investing have had trouble making money this year. Equity funds last week suffered their seventh consecutive week of outflows, taking net redemptions for the year above $100bn, according to EPFR Global.

    Past performance of some of their IPOs has also not encouraged more buying. Investors have lost 15 per cent on average on 2015’s class of IPOs, according to Renaissance Capital. In turn, they have demanded price concessions on this year’s vintage to cushion against volatility, and those that have managed to price are up nearly 20 per cent.

    While that helps, the backlog of companies that are potential IPO candidates haven’t included the kind of big brand names seen in the past few years, such as Facebook, Twitter or Alibaba.

    Chart: The slowest year for US IPOs since 2009

    “We haven’t presented to investors the same large-cap, must-own IPOs that we have done over the last few years,” says Michael Wise, global vice-chairman of equity capital markets at Bank of America Merrill Lynch. “It has been more a handful of mid-cap IPOs.”

    Tech deals, typically a mainstay of the US listings market, remain scarce. The hottest names out of Silicon Valley have been able to raise billions of dollars at high valuations privately in recent years. Some are flush with cash and can bide their time before going public, but there is also a disconnect between the valuations that these companies have garnered in a white-hot private market and what they will fetch in the public markets that are luke warm at best.

    Chart: Weak showing of 2015 listings hurts sentiment

    Two unicorns have publicly filed with regulators to go public. Nutanix, which makes products for computing and storage, and Twilio, which enables companies to add voice and messaging services to apps and filed IPO paperwork last week, will be widely watched as tests of demand.

    “There needs to be a resolution of this backlog of tech names,” says Matthew Kennedy, an analyst at Renaissance Capital. “That comes when the VC firms either decide to cut their losses and offer bargain prices compared with what they paid, if risk appetite grows or if these companies experience a faster shift to profitability. Any of those could cause more tech IPOs. Investor sentiment towards growth does ebb and flow.”

    For now, it’s the wider US IPO market that is in need of some growth.