IT will be one of the biggest market events of the year. Yes, I’m referring to Facebook’s Initial Public Offering (IPO) – and D-Day is getting ever closer. The company filed to go public in February, and last week trading of its shares was halted on the secondary market as it tries to cement its current shareholder base. We think it may be targeting May for the IPO, although the exact timing is unclear as it’s in the hands of the SEC, as opposed to Facebook itself. But an event that could raise as much as $10bn will be a real market mover.
Equities have put in a very solid performance over the first quarter with the FTSE up 3.5 per cent, the French CAC rising 8.5 per cent, and Germany’s Dax rallying almost 18 per cent. Against this backdrop, you would be forgiven for thinking that companies are feeling confident, and that the overall IPO market has been picking up too. Not so.
In fact, according to Ernst & Young, global IPO activity fell by a sharp 69 per cent in the first quarter of 2012 compared to the same period last year. Average deal size decreased by 42 per cent, and, in terms of pricing, the report says just seven per cent of IPOs were priced above their initial filing range.
Despite this, Maria Pinelli, global IPO leader at Ernst & Young, told me that there still are positive signs when it comes to fundraising worldwide. She expects to see a lot more cross-border activity in 2012, with companies choosing to list on markets outside their home turf.
During the first quarter, IPO activity on Asian exchanges accounted for 47 per cent of global IPO funds raised – though Asia still saw a 74 per cent drop in capital raised. Pinelli thinks that China will continue to draw IPO interest.
Looking at particular sectors, Pinelli thinks US technology companies will continue to dominate the US listing space. Of the 32 IPOs completed in the US, more than a third of them were done by technology companies. Pinelli pointed out that the average market value for US technology firms, at the time of their IPO, was double the average market value versus companies from other sectors.
Globally, by funds raised, almost one in five IPOs came from the industrials sector, followed by consumer products and services, according to Ernst & Young. By deal numbers, over one in five IPOs came from the tech sector.
Leading into 2010 and indeed 2011, we were optimistic and thought that the worst was behind us. But then European politics took over, and confidence went horribly wrong, both in the IPO market and practically everywhere else. Let us hope this year will be different – and that Facebook is able to serve as a catalyst for better times.
Louisa Bojesen is a CNBC Anchor
Follow her on Twitter @louisabojesen