June 28, 2018 / 11:12 PM / 4 months ago

High tech firms buck slowdown in global equity raising

LONDON (Reuters) - Share issues by China’s Tencent Holdings and Foxconn Industrial Internet Co (601138.SS) helped global technology stocks buck the generally weaker trend for capital raising from equity markets in the first half of 2018, data showed on Friday.

A Tencent sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. REUTERS/Aly Song

In the first six months of the year, companies raised a total of $386.8 billion in equity, down 0.9 percent on the same period of 2017, Thomson Reuters Equity Capital Markets (ECM) data to June 25 showed.

Activity fell as much as 12.3 percent in the second quarter to $180.3 billion with proceeds from initial public offerings (IPOs) falling 11.2 percent to $41.8 billion, dragged down by a 34.9 percent fall in Europe.

The share sale of internet conglomerate Tencent Holdings (0700.HK) by Naspers Ltd (NPNJn.J) was the biggest transaction in the first half of 2018 raising proceeds of $7 billion.

The IPO of contract manufacturer Foxconn Industrial Internet (601138.SS) was the biggest in the second quarter when its shares soared as much as 44 percent on the first day of trading.

Overall global capital raising from equity markets by technology companies rose 58.9 percent to $67.3 billion in the first half while the healthcare sector was also active and increased 26.8 percent to $43.2 billion, boosted by the IPO of Siemens Healthineers (SHLG.DE).

“Technology and healthcare have two things in common: structural growth meaning growth is less correlated to global GDP growth and they’re closely aligned with consumer trends and behavior. Investors have greater conviction in terms of investment in these sectors,” said Achintya Mangla, head of ECM in Europe Middle East and Africa at JP Morgan.

“These sectors are seen as more likely to weather short term volatility and geo-political risk,” he added.

Bayer’s (BAYGn.DE) $7 billion rights issue to help fund its planned $66 billion takeover of Monsanto MON.N was the biggest equity issue globally in the second quarter.

“Corporate activity, including M&A, has driven some landmark equity offerings this year, but overall deal flow has been a touch lighter because financial firms have largely completed their balance sheet strengthening and don’t need to recapitalize,” Craig Coben, vice chairman of global capital markets at Bank of America Merrill Lynch (BAC.N).

“Moreover, the IPO market has been choppy as investors have been selective and price-sensitive.”

Bankers said one transaction was canceled for every one which went ahead as investors had many IPOs to choose from and were discerning, shunning some offerings while piling into others such as payments processor Adyen (ADYEN.AS) which doubled in value on its debut.

Goldman Sachs (GS.N) topped the league table for global ECM issuance overall while Morgan Stanley led on global IPOs for the first six months of the year.

Editing by Elaine Hardcastle

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