In Q2, global IPO activity continues to rise significantly

Global IPO fundraising activity rose by 39% in the second quarter compared to the first quarter of 2011 and increased by 38% compared to the second quarter of 2010.

In Q2 2011, 378 IPOs globally raised a total of US$64.6b, according to Ernst & Young’s Q2 2011 Global IPO update. Asian exchanges still dominated listings this quarter, with 163 IPOs raising US$27b, (42% of global capital raised) followed by European (27%), and North American exchanges(24%).

However, Asia’s current lead now falls far short of its dominance in Q3 2010 when Asian exchanges made up 81% of global capital raised. The top three sectors globally were the materials, industrials and energy accounting for 45% of IPOs total value.

“Reflecting the huge pent-up demand for capital, we saw a continued strength in Asian capital markets and continued revival of IPOs across Europe and North America, led by IPO deals from the materials, industrials, energy and technology sectors,” says Maria Pinelli, Global Vice Chair for Strategic Growth Markets for Ernst & Young.

US driven by high profile internet IPOs

With US investors drawn by high growth expectations, internet IPOs have been driving the 2011 US IPO market, while non-technology offerings have often seen lacklustre demand. Of the 46 IPOs completed in the U.S. worth US$ 13.8 b, 14 deals raising US$ 4.9 b have been by technology companies, or roughly 36 % of the total US IPO volume.

The largest high technology IPO in Q2 was the NASDAQ listing of Russia’s most popular search engine Yandex, which raised US$ 1.43 b. “The social networking revolution will drive the price of social media IPOs, while its valuation model will continue to be refined,” says Pinelli.

Europe sees a 534% rise in IPO capital raised

In Q2, European exchanges saw a huge 534% rise in capital raised (US$17.7b raised in 95 IPOs) compared to the first quarter (US$2.8b raised in 54 deals) thanks to Glencore’s listing in London. Among European exchanges, the London Stock Exchange raised the most capital (US$12.6b) with 21% of capital raised coming from Russian issuers. The largest global as well as European IPO so far this year was the US$10b IPO of Swiss commodities trader, Glencore International, which listed on the London and Hong Kong stock exchanges.

The European IPO pipeline continues to fill up even in the face of the Eurozone debt crisis, poor aftermarket trading by numerous withdrawals and postponements,” says Pinelli.

Asia sustains lead but is losing momentum

Asian exchanges still leads the world in IPOs, but lost some of its previous dominance in Q2. Asian exchanges completed 163 deals which raised US$ 27 b, an 11% raise in capital raised compared to Q2’10. The largest IPO on Asian exchanges in Q2 was the US$ 2 b listing of Italy’s luxury fashion retailer Prada on the Hong Kong Stock Exchange.

The Hong Kong Stock Exchange in Q2 raised US$ 11.3 b in 19 deals, while the Shanghai and Shenzhen Stock Exchanges (SME and ChiNext) raised US$ 10.3 b in 77 deals altogether. “Chinese IPO activity has slowed down, with investors restrained by Chinese inflationary concerns over commodity prices and housing prices,” says Pinelli. “Even so, the Chinese IPO pipeline is still very strong, containing large state-owned enterprises, and mid-cap companies.”

Future outlook

“Despite the continued uncertainty of a global economic recovery, the IPO remains at the heart of many companies’ growth strategy,” concludes Pinelli. As the global IPO pipeline continues to build up, we expect a strong second half for new offerings from high profile issuers, notably from the US and Europe.”