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Global equity deals rise in third quarter but down 30 percent year-to-date - Thomson Reuters data
September 30, 2016 / 1:27 AM / in a year

Global equity deals rise in third quarter but down 30 percent year-to-date - Thomson Reuters data

LONDON (Reuters) - Global equity fundraising rose in the third quarter, Thomson Reuters data showed on Friday, but failed to make up for the sharp slowdown of the first half of 2016, when volatile markets deterred listings.

Equity fundraising worldwide fell 30 percent to $463.5 billion in the year to date. Bankers said a robust pipeline of deals may improve conditions over the next two quarters but equity fundraising is unlikely to reach levels seen last year.

Money raised from flotations, or initial public offerings (IPOs), fell more than a third to $79.2 billion in the first three quarters, the slowest such period since 2009, Thomson Reuters Equity Capital Markets (ECM) data showed.

Bankers said deals which could not be done earlier in the year because of choppy market conditions saw their window in the last few months, resulting in an unseasonably busy third quarter.

Achintya Mangla, head of EMEA ECM at JP Morgan in London, said investors had become more comfortable with Britain’s decision to leave the European Union, and with the outlook of the U.S. Federal Reserve and the stable conditions across Europe.

    “It’s not a bull market but it’s a constructive market with a lot of liquidity which investors are keen to deploy into the right equity story and at the right price,” he said.

“It’s not a market you can take for granted. Volatility could return and investors will monitor the trading performance of deals.”

Global markets .WORLD were on track for their biggest quarter-on-quarter boost for five quarters, compared to a decline in the first three months of the year.

Worries about a slowdown in China, the world’s second biggest economy, and falling oil prices which hit $27 a barrel in January, made for a volatile first quarter with investors wavering between calm and panic.

In June the British vote to leave the EU heaped on additional volatility and spooked some companies hoping to tap equity markets.

Bankers said some listings which could not be done then were postponed to August and September.

Professional services firm EY saw a healthy pipeline of deals for the remainder of the year and the start of 2017, with improved political stability and greater clarity over Brexit negotiations holding the key to a pickup in IPO activity.


In the final days of the quarter, a $7.4 billion IPO of Postal Savings Bank of China (1658.HK) made a flat debut in Hong Kong as worries over the health of the banking sector squeezed retail demand.

The IPO was the biggest in two years and drove a more than five-fold increase in the value of IPOs in China in the quarter.

The demand for shares in Nets (NETS.CO), issuer of Denmark’s most used debit card, exceeded expectations last week but closed 5 percent below its offer price on Thursday.

The tech business was valued at $4.5 billion, nearly double what Advent International, Bain Capital and pension fund ATP paid for it two years ago.

    Bolstered in part by a $4.1 billion convertible bond issue for Vodafone (VOD.L) in February, JP Morgan (JPM.N) came out top of the league table for equity offerings. It was also the top bookrunner on IPOs globally.

    “Markets are constructive right now and investors are willing to put money to work but they are selective and disciplined on price. There are events on the horizon [U.S election for example] which could cause market volatility so we would advise to clients to do deals now if it makes sense,” JP Morgan’s Mangla said.

    An IPO of British mobile unit O2 by Spain’s Telefonica (TEF.MC) is expected to be one of the biggest listings in London later this year, with the group expected to take advantage of the relative market calm following the Brexit vote.

    The firm has hired UBS (UBSG.S), Morgan Stanley (MS.N) and Barclays (BARC.L) as global coordinators for the listing, which could value O2 at about 10 billion pounds ($13 billion).

    Bankers said they had a robust stream of equity raising deals coming up, but no bank was likely to see the business pipeline of 2014-15, when a season of private equity exits helped keep ECM bankers busy.

    With the U.S. elections in November, a referendum on constitutional reform in Italy in December and the triggering of Britain’s formal divorce proceedings from the EU expected early next year, there remain opportunities for market swings.

    But Gareth McCartney, EMEA Head of Equity Syndicate at UBS, said there was more clarity with respect to macroeconomic events, with some questions critical to geopolitical and market stability about to be addressed.

    “We are now in a sweet spot where we have visibility on the macro front, ahead of the upcoming U.S. elections and clarity on the Italy referendum. We are in the middle of the best part of the year for executing transactions,” he said.

    “It will be a slow burn, a lower volatility environment, which should allow for greater issuance.”

    Reporting by Dasha Afanasieva; Editing by Mark Trevelyan

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