Energy, resources lead the way in depressed European IPO market

Energy and resources companies proved to be the bright spot in an otherwise depressed European initial public offering (IPO) market in the second quarter of 2008, representing the bulk of capital raised, according to PricewaterhouseCoopers LLP. The firm’s latest quarterly IPO Watch Europe survey, which tracks the volume and value of IPOs on Europe’s main stock exchanges, showed that in the April to June period there were 132 IPOs on European markets, just over half the 258 recorded in the same period of 2007. This was a significant increase on the 72 IPOs in the first quarter of this year, consistent with the traditional trend for higher IPO activity prior to the summer break.
The total offering value of IPOs on the European markets in the second quarter of 2008 was EUR 9,424 mln, a dramatic reduction in money raised compared to EUR 28,000 mln raised in the same quarter of 2007. The largest IPO of the quarter, raising EUR 1,566 mln, was by EDP Renováveis SA, a Portuguese renewable energy company listing on NYSE Euronext. The second largest was New World Resources, a Czech Republic mining company, which raised EUR 1,390 mln through a listing on the main market in London, the main market of the Warsaw Stock Exchange (WSE) and on the Prague Stock Exchange.
There were 33 IPOs by non-European companies in the quarter raising a total of EUR 3,497 mln, a fall in both volume and value from quarter two of 2007 when there were 39 non-European IPOs raising EUR 8,794 mln.
London continued to dominate the exchanges, raising over half of the total offering value across Europe. It also remained the destination of choice for non-European IPOs, accounting for 24 out of a total of 33.
In terms of offering value London was the largest market this quarter raising EUR 6,298 mln compared with 14,808 mln in the second quarter of 2007. Despite London’s lead, it was one of the exchanges most affected by the volatility in the financial markets with money raised in the quarter representing only 43% of that raised in the same three months of 2007.
London also continued to lead by volume, with a 35% share of all European IPOs, albeit down from 39% a year ago. The first two quarters of 2008 have seen the WSE following behind London in volume terms, hosting respectively 25% and 28% of European IPOs. This increase in market share is being driven primarily by the recently opened New Connect market, an exchange regulated market, which generally attracts smaller offering value IPOs.
Activity on London’s AIM market fell compared to the same quarter in 2007 with 23 IPOs raising EUR 699 mln in the second quarter of 2008 compared to 65 IPOs raising 3,327 mln a year ago.
“Given the current difficult economic conditions, we are unlikely to see any recovery in the European IPO market much before the start of 2009. This is not surprising since the IPO market is a lead indicator for the health of capital markets in general, which are currently in a depressed state,” explained Tom Troubridge, head of Capital Markets Group, PricewaterhouseCoopers.
The WSE was the second largest exchange by volume and money raised in the second quarter of 2008 with 37 IPOs raising EUR 1,890 mln, including New World Resources which also listed in London and Prague. The activity on the exchange has increased from 19 IPOs in the same quarter of 2007 and the money raised has also increased from EUR 960 mln.
NYSE Euronext was the third largest exchange by volume and money raised in the quarter with 15 IPOs raising EUR 1,615 mln. Activity on the exchange fell compared to the second quarter of 2007 which saw 38 IPOs raising EUR 2,008 mln.
Deutsche Börse hosted eight IPOs raising EUR 330 mln in the second quarter of 2008, well down in both volume and value compared to quarter two of 2007 when it hosted 17 IPOs raising EUR 3,018 mln.
The OMX exchanges hosted 10 IPOs raising EUR 178 mln in the second quarter of 2008, a very significant fall in both volume and value of IPOs compared to quarter two of 2007 where it hosted 40 IPOs raising EUR 1,638 mln.
Luxembourg hosted six IPOs in the second quarter of 2008 raising EUR 49 mln, an increase in activity compared to the same quarter in 2007 which saw four IPOs on the exchange, but the money raised fell from 614 mln.
The Oslo exchanges, Børs and Axess, together hosted six IPOs this quarter raising EUR 28 mln. This represents a notable fall in money raised when compared to the same quarter in 2007 which saw EUR 667 mln raised from 15 IPOs.
Highly unusually, the US exchanges saw a drop in IPO activity both from the first quarter of this year and the second quarter of 2007. Just 17 IPOs were recorded, raising EUR 3,447 mln, compared with 25 raising 15,588 mln in the first three months of this year and 79 raising 15,638 mln a year ago. A large proportion of the offering value on the US exchanges in the first quarter of this year was accounted for by a single IPO on NYSE, that by Visa Inc, which raised EUR 11.5 bln ($17.9 bln) reported to be the largest IPO in the history of the US capital markets.
According to the recent report from PricewaterhouseCoopers China, the total IPO money raised for the first six months of 2008 amounted to EUR 8,314 mln in mainland China and 4,215 mln in Hong Kong. In mainland China there were 58 IPOs in the first half of year compared to 50 in the same six months of 2007. Despite the increase in the volume of IPOs, the money raised declined from EUR 14,912 mln in the first half of 2007 to 8,314 mln in the first six months of this. In Hong Kong there were 23 IPOs in the first half of 2008 and 34 a year ago. The IPO offering value amounted to EUR 4,215 mln, a 51% fall from the first half of 2007.