CORPORATE FINANCING NEWS: GLOBAL EQUITY / DRS
By Gordon Platt
The Asian markets accounted for 76% of global funds raised in initial public offerings in the third quarter of 2012, and there are more than 200 Asian companies in the IPO registration pipeline, according to Ernst & Young.
There was a sharp decline in global IPO deal value and volume in the third quarter, but recent listings suggest there could be a pickup in the coming months, says Maria Pinelli, global strategic growth markets leader at Ernst & Young.
Global IPOs raised $24.1 billion in the third quarter, a decline of 46% from the second quarter and a 16% fall from the third quarter of last year. The number of deals totaled 165 globally in the three months ended September 30, down from 248 deals in the second quarter and 291 deals in the same period last year.
“Although activity in China and Hong Kong was down in the [latest] quarter in line with the overall decline in economic growth, some markets, like Malaysia and Singapore, are very active, and some sectors, including mining, industrials and healthcare, are pursuing IPOs,” Pinelli says.
The general consensus is that Asia is performing better than last year, with the improved confidence owing to some exceptionally large deals, she adds. The largest Asian IPO in the third quarter was the $8.5 billion listing of Japan Airlines on the Tokyo Stock Exchange. Other large Asian deals included Malaysia’s IHH Healthcare, which is dual- listed on the Singapore Stock Exchange and the Bursa Malaysia, and China’s Inner Mongolia Yitai Coal on the Hong Kong Stock Exchange.
Shanghai Fosun Pharmaceutical’s $512 million IPO on the Hong Kong exchange on October 30 was the third-largest Hong Kong IPO so far this year. Cornerstone investors included Prudential Insurance and the International Finance Corporation.
The US exchanges raised $3.5 billion, or 15% of global proceeds in the third quarter, while the European IPO market suffered from difficult economic conditions and accounted for only 2% of global capital raised. Poland led the way in IPO activity in Europe, with 12 out of 23 IPOs in the region.
In the US, the healthcare sector has been active. Kythera Biopharmaceuticals, a venture-funded firm with a major partnership with Bayer, and Intercept Pharmaceuticals, which is developing new therapeutics to treat chronic liver disease, each rose more than 20% in their debuts in October.
In the DR market, Israel’s Teva Pharmaceutical Industries selected J.P. Morgan as successor depositary bank for its New York Stock Exchange–listed American depositary receipt program. Teva develops and manufactures generic and branded pharmaceuticals, as well as pharmaceutical ingredients.
Restoration Hardware, a US high-end home furnishings retailer, rose 33% in its debut in early November. Workday, a provider of Cloud-based enterprise software, had a first-day gain on the NYSE of 74% on October 11. The average first-day rise for all IPOs in the US so far this year has been about 14%, according to Renaissance Capital.
Chinese social-media platform YY said it plans to raise $90 million by offering 7.8 million American depositary shares on Nasdaq. There has been only one other China-based IPO in the US so far this year. Retail website VIPshop fell more than 30% in its first few weeks of trading in March but has since recovered.
FIRST SOVEREIGN RATINGS FOR NIGERIA, KENYA AND ZAMBIA
Citing Africa’s rapid economic growth and increasing use of international capital market finance, Moody’s Investors Service assigned sovereign ratings to Nigeria, Kenya and Zambia for the first time.
Oil-rich Nigeria, a large economy with an underdeveloped infrastructure, received a Ba3 rating. Moody’s said the country’s recent establishment of a sovereign wealth fund, the Nigerian Sovereign Investment Authority, was a positive for Nigeria’s financial strength.
Moody’s expects Nigeria’s economy to expand by 7.1% this year, slightly less than 7.4% in 2011, as a result of higher interest rates.
The ratings agency cited Nigeria’s “weak institutional strength,” as reflected in low World Bank governance scores, but added that there have been some improvements recently. Moody’s also said there are security risks because of heightened militant activity in the north of the country.
Kenya and Zambia each received B1 ratings. Kenya’s economic resilience and ongoing diversification should boost the country’s still-low wealth levels over time, Moody’s said. Recent oil discoveries in northwest Kenya will reduce the country’s dependence on imported oil. Kenya has a high debt burden, but a relatively developed capital market, Moody’s said.
Zambia has a track record of political stability, and its economy has grown rapidly in recent years as a result of higher copper prices and production, as well as growing foreign direct investment, according to Moody’s. It expects Zambia’s economy to grow by 7.3% in 2012, up from 6.6% in 2011.
Moody’s already rates six other sub-Saharan African countries. Botswana is the highest-rated, with an A2 sovereign rating.