Global IPO activity down 57%, raised only $28.5b in 2011 third quarter

Global Initial Public Offering (IPO) activity has fallen sharply in the 2011 third quarter with a total of 284 deals recorded raising an amount of $28.5 billion compared to 383 IPOs worth $65.6 billion in the 2011 second quarter, according to Ernst & Young’s (E&Y) quarterly global IPO update released October 5, 2011.

The E&Y says the number of deals decreased 26% while capital raised also dropped 57%.

“Whereas in 2010 third quarter, there was 302 IPOs which raised $52.5 billion (a 6% drop in number and a 46% decrease in capital raised compared to 2011 third quarter). This quarter globally, only 3 deals raised over $1 billion. Average deal size decreased in many markets in 2011 third quarter compared to 2011 second quarter. The global average deal size was $100 million in 2011 third quarter, compared to 2011 second quarter ($171 million),” said the UK-based accounting firm.

Data from Dealogic, E&Y noted shows that 22 IPOs have been postponed and 49 withdrawn in the third quarter 2011, which was 20 and 76 respectively for second quarter 2011.

This is mainly due to market volatility. However, approximately 9 out of 10 global IPOs were priced within or above their initial filing range in third quarter 2011 – this is similar for second quarter 2011 and first quarter 2011, it added.

E&Y said Asian issuers continue to dominate IPO activity during the quarter with 138 deals, which raised $13.5 billion altogether (47% of global funds raised) but it is the lowest level of capital raised by Asian issusers since 2009 second quarter ($3 billion in 44 deals).

European issuers completed 69 deals and raised $8.8 billion representing 31% of global funds raised. It said North American issuers raised $4.5 billion in 41 deals (16% of global fund raised) compared with $11.6 billion raised with 55 deals in 2011 second quarter (18%).

With IPOs by sectors in terms of funds raised, E&Y said the top three sectors remained Financials ($6.8 billion from 16 deals), Materials ($5.8 billion from 72 deals) and Industrials ($4.3 billion from 48 deals).

Commenting, Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young said “The third quarter results show that the Eurozone and US debt crisis have had a deep impact on the IPO market and on both issuers and investors’ confidence. There are, however, many very good businesses still waiting to go public. Companies have not stopped seeing IPOs as a way of raising capital. They are waiting for markets conditions to improve, while continuing to prepare for their IPO.”

Giving the future outlook, Maria Pinelli said “As soon as the market stabilizes, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally.”

By Ekow Quandzie

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