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IPO market continues recovery

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PricewaterhouseCoopers' latest IPO Watch Europe survey, tracking volume and value of IPOs on Europe's main stock exchanges, shows a continuing recovery in the IPO market in the first quarter of 2004. There were 56 IPOs between 1 January and 31 March, considerably higher than the 15 recorded in the same period of 2003.The total offering value of IPOs in the first quarter was €5.24bn, a big increase on both last quarter's figure of €2.62bn (when there were 73 IPOs) and the like period a year ago when it was just €77m. This rise can be largely explained by the high value IPO of Belgacom (€3.29bn on Euronext) that accounted for 63% of the total offering value on all exchanges in the quarter. The market trend for the first quarter over the same period in 2003 was for a higher number of IPOs with a significantly higher average offering value - €94m compared with €5m. In terms of the number of transactions, London continued to dominate, increasing its market share of all IPOs to 70% by number, up from 61% last quarter and 53% a year ago. In all, London had 39 IPOs with a total value of €1.12bn. 35 of these were on the smaller companies market AIM. Euronext saw 10 IPOs, up from three a year ago and an increase in offering value to €3.62bn from just €4m, due mainly to the flotation of the Belgian telecom company Belgacom on 22 March, raising the most of any IPO for three years.Tom Troubridge, head of PricewaterhouseCoopers London Capital Markets Group, said: ‘Activity in the first quarter of 2004 indicates a continued recovery in the European IPO market which remains open for business for the right kind of companies. London and Euronext remain the dominant exchanges, accounting for some 88% of total IPOs in the quarter, while Scandinavia is also showing promise. However, confidence is fragile and can easily be undermined by global economic or political events. The pipeline for the next two quarters looks promising, but investors remain selective. As the pulling of the two technology IPOs in Germany may have shown, it is perhaps too early to bring companies to market that are not generating strong cashflow and paying dividends. It seems the dot com boom of a few years ago has left a bad taste in the mouth of investors who are less interested in companies approaching the main equity markets that are still at an early stage in their development. AIM continues to be active and offers a market for earlier stage companies.’Dublin experienced its first IPO since 2001 with the telecom company Eircom raising €296m, the second largest IPO in Europe this quarter with a dual listing in London. The third largest IPO was fertiliser manufacturer Yara that raised €292m in Oslo, while the fourth largest was Portuguese media company Media Capital that raised €217m on Euronext.The cosmetics company Oriflame floated in Stockholm but Athens, the Borsa Italiana, Copenhagen, the Deutsche Börse, Helsinki, Luxembourg and Madrid all went without an IPO in the quarter. Warsaw, which has been included in IPO Watch Europe for the first time this quarter, showed signs of promise with an increase in the number of IPOs from one to three.Mining was the most active sector with an increase from three IPOs in Q1 2003 to 10 in Q1 2004. Software & computer services saw nine IPOs in the first quarter of this year, up from five in the same period a year ago. Mining and software and computer services accounted for 34% of the total IPO market in Q1 2004. Although telecommunications services only accounted for 7% of the total number of IPOs in Q1 2004, the sector made up 70% of the total offering value.Partly due to the lower numbers in the like period of 2003, there were no significant year-on-year downward sector trends. However, compared with the last quarter of 2003, real estate saw a significant fall from six to two in this quarter. Speciality & other finance declined from six to one and construction & building materials from four to one in the same period. The US markets also experienced a surge in activity last quarter, with a significant increase in the number of IPOs. Nasdaq and the NYSE combined saw an increase in IPO activity between Q1 2003 and Q1 2004 from six to 38. On Nasdaq, there were 25 IPOs in Q1 2004, up significantly from just three in Q1 2003. In the same period, the NYSE saw an increase in the number of IPOs, from three to 13. The two largest IPOs of the quarter in the US were on the NYSE, with Semiconductor Manufacturing Corp. raising €1.5bn and the insurance company Assurant raising €1.4bn.
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