It may have been the year of the mega deal, but the capital markets have suffered in 2015, and it’s been a decidedly poor year for cross-border IPOs.
Fears over China’s growth, elections, referendums, and defaults in Europe, as well as uncertainty over the Fed’s rate hike all contributed to a 39 per cent drop in the number of cross-border IPOs this year, according to Baker & McKenzie’s cross-border IPO index.
The value of cross-border IPOs, which is when a company lists abroad, and is a good test of the liquidity of the IPO market, fell 56 per cent from last year, to $35.5bn (£23.45bn) from 116 deals.
Last year, there was a 26 per cent increase in the number of cross-border IPOs, and in 2013 there was a 58 per cent rise.
Instead of risking a floatation on volatile markets, companies put their war chests to use for M&A instead. Edward Bibko, Baker & McKenzie’s EMEA chair of capital markets told City A.M.: “Everywhere’s been down. Europe probably the toughest, it’s been a real obstacle course this year.”
This was partly because “the M&A market has been very hot, and people could get better valuations,” but also, geopolitical fears over Syria, Scotland, Greece, the UK’s general election unsettled investors.
There will be similar problems going in to 2016, when the Spanish elections and interest rate divergence will weigh on markets. “Banks are bracing for more challenges in 2016, including the British EU referendum and interest rate hikes,” he added.
Volatility remains high, with the Vix, the index which measures volatility, around 25. Anything above 20 normally spells a quiet patch for IPOs as valuations are hard to pin down, and investors look for safety in debt.
Ferrari’s trophy listing on the New York Stock Exchange in October stood out as the only non-Asian deal among the top 10. The rest were Chinese companies listing in Hong Kong, which made Hong Kong the largest exchange thanks to its access to the Chinese markets, ahead of the Nasdaq, and the London Stock Exchange.
“London is the one truly global exchange,” according to Bibko, “it has Europe, emerging markets, and specialities – metals and commodities – it’s a deep pool and geographically perfectly located.” He added:
In some respects it's a good news story, despite the incredible obstacles, things still got done, and it was a fairly positive fourth quarter.