The year started well enough for the bankers who make their living and get their adrenaline rushes from raising capital for ambitious companies.
In Europe the IPO door, partially opened last year by the selling of a large chunk of RBS’s stake in Direct Line, was pushed further ajar by the listing of Crest Nicholson and in the US there was news of several takeovers, including Liberty Media’s tilt at Virgin Media.
But the most recent figures from Dealogic for Europe show a slowing of the pace in some areas.
European rights issues, in which companies raise money primarily from existing shareholders, are down 77 per cent year on year and at $3.3bn (£2.1bn) are the lowest year to date figures since $1.4bn in 1997. The $558m rights offering for the UK bookmaker William Hill, not exactly a bumper-sized transaction, was the largest of its kind in April.
The $4.1bn rescue rights issue for the Dutch telecoms firm KPN looks set to be the largest in Europe so far this year but there is not exactly a welter of companies looking to raise new equity despite the strength of many financial markets.
The situation with IPOs is similarly unspectacular, with IPO volume in April the lowest monthly total of the year so far with just $1.4bn raised in Europe via 14 deals.
It is not totally desperate as the German chemicals maker Evonik did manage to float this month after at least three previous attempts.
“A key part of the capital formation process has been relatively inactive,” says Craig Coben, the head of equity capital markets for Europe at Bank of America Merrill Lynch. “The central banks have reflated asset prices but there hasn’t yet been a follow through in equity raising to finance growth.”
The one area where business is hotting up considerably is the accelerated offerings, in which many of the deals involve shareholders selling out large stakes in publicly listed companies.
The busiest shareholders this month have been those in Airbus parent EADS who have arranged a series of offerings in the stock to raise a total of $7.3bn. Other big issues include Deutsche Bank’s $3.9bn fund-raising, issued to strengthen the balance sheet of the bank.
Whilst accelerated offerings are flavour of the month they are also massively competitive for the investment banks and have occasionally had unfortunate consequences, such as when Barclays inadvertently ended up with a 14 per cent stake in the telecoms provider Ziggo (since sold).
Banks bid keenly against each other and sometimes find they can not distribute all the stock they have to place.
Bankers would love to get back to the job of raising capital. But the process hasn’t yet been as quick as they imagined and while there is still fears of another Euro meltdown, they might have to continue living off the scraps they are currently getting.
City A.M is hosting a roundtable discussion on the IPO market with an invited audience on 20 June, in partnership with Jefferies. If you would like to attend the discussion please contact me at firstname.lastname@example.org