Global IPO proceeds hit four year high in first quarter

• Global IPO proceeds up 26% to $38.9 b in Q1 2018
• Companies raised $186.7 bin equity in Q1 2018
• Bankers look to “unicorn” IPOs despite tech sell off

LONDON (Reuters): Global proceeds from initial public offerings (IPO) rose to $39 billion in the first quarter of 2018, the highest since 2014, as companies rushed to take advantage of generally strong equity markets and robust economic growth amid signs they may not last.

Companies raised a total of $186.7 billion in equity, up 3.5% from the same period last year, Thomson Reuters Equity Capital Markets (ECM) data to March 26 showed. Activity fell in Europe, though, after several big bank fundraisings last year.

Global IPO proceeds jumped almost 26% to $38.9 billion, driven by strong increases in Europe and the Americas.

“CEO confidence is up, investor activity is up and valuations are attractive because of a strong secondary market. Corporates are taking advantage of that,” Gareth McCartney, head of Europe Middle East and Africa (EMEA) ECM syndicate at UBS said, adding an early Easter also encouraged issuers to push ahead with IPO plans.

European IPO proceeds more than tripled, with two of the three largest offerings globally coming from Germany: the long awaited listing of Siemens’s 28 billion euro ($35 billion) medical equipment arm Healthineers and Deutsche Bank’s 6.5 billion euro asset management arm .

“Pockets of Europe are increasingly attractive to investors, with German and French leadership secure,” said Philip Drury, head of EMEA capital markets at Citi, referring to elections last year in both countries.

After unusual market calm in 2017, 2018 began with a sell-off in January and February and the biggest ever rise in stock volatility.

Rapidly escalating tensions over global trade, with a threat of US tariffs on up to $60 billion of imports from China, and major tech sector wobbles were keenly felt by markets. Bankers also blamed the looming end to central bank bond buying programs, which had helped inflate asset prices and stoke growth, for the increased market sensitivity.

“Currently, there is more nervousness within market participants relative to this time last year. Having said that, issuers need to move forward into windows when available. Increased rhetoric from the US has an impact on the global capital markets,” Drury said.

In Europe, a large rights issue to help Bayer fund its planned $66 billion takeover of Monsanto is anticipated.

A series of large IPOs is also expected in the region in the second and third quarters, but some bankers caution the chain of upcoming listings reflects sentiment from last year, when companies would have decided to go to market.

Bankers are also looking ahead to the potential listing of US tech unicorns – companies that have achieved $1 billion valuations without tapping stock markets – such as Uber and Airbnb, to see if they can shrug off a recent sell off in the FAANGs (Facebook, Amazon, Apple, Netflix and Google) on privacy concerns after it was revealed that 50 million Facebook users’ data was misused.

“The market rally that we’ve seen in the US was incredibly narrow with a small number of companies creating a disproportionate amount of value. It’s a bit of profit taking and does not necessarily translate to a broader rotation out of technology,” McCartney said.

Morgan Stanley topped the league table for global ECM issuance overall and global IPOs.