After significantly outperforming domestic initial public offerings in both value and volume growth the past two years, cross-border deals slid back to just below 2013 levels in 2015, according to Baker & McKenzie’s Cross-Border IPO Index released today.
Domestic and cross-border IPO activity both fell, for a number of reasons — potential issuers faced poor market performance, geopolitical uncertainty, low commodity prices and interest rate rises on the horizon.
Meanwhile, cash rich corporates continued to put their war chests to use, meaning trade sales often provided more certainty and often higher valuations than an IPO. Good for M&A, less so for equity capital markets.
In the background, the anticipation of an increase in the US Federal Reserve rate has been adding to volatility. While US rate rises will inevitably begin the normalisation of the economic cycle, short term pain for the equity markets is equally inevitable. The Eurozone is going the other way, ramping up monetary stimulus as the US tapers off.
China provided some of the biggest equity shocks of all, with stock markets swinging wildly amid fears of a Chinese hard landing, which have since dissipated. Ironically, amidst the volatility, the Asia-Pacific region is the only one to have seen increased cross-border IPOs, demonstrating both the robust nature of Chinese markets and the interconnections between economies.
Overall, cross-border IPOs raised US$37.8 billion worldwide to 10th December, down 53% from last year.
To put that in context, cross-border deal values rose 98% in 2014 and 73% in 2013. Domestic issuance fell a more modest 25%, but off the back of a rise of just 2% in 2014.
Cross-border volumes declined 32% to 128 deals after a 26% gain in 2014 and 58% increase in 2013. Domestic volumes also fell, by 17%.