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IPO markets didn’t meet expectations in 2019

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IPO markets didn’t meet expectations in 2019
December 30
09:00 2019

Last year was not very successful for the IPO. Investors were waiting for large companies to enter the market. It is about such companies as Uber, Saudi Aramco, WeWork, etc. But things don’t look so great now.

The IPOs, which were supposed to be successful, did not go according to the scenario that everyone was waiting for. Uber has failed and is trading below the offering price. WeWork turned down the IPO too. That is why many companies also abandoned the IPO. Saudi Aramco’s listing was held domestically, so global banks were unable to participate in it.

The total volume of IPO 2019 is estimated at approximately $ 189 billion. This is 10% less than the same indicator in 2018.

Commissions earned by investment banks have decreased by 15% over the past year. This trend may continue in the current year. More and more companies prefer direct listing without the involvement of investment banks.

How was the IPO of Saudi Aramco?
It was supposed to be very loud, but it turned out to be the main disappointment for the world’s largest investment banks. Some organizations have been preparing to participate in it for several years. However, at a crucial moment, investors considered the value of the company too overpriced. It should be noted that the company’s value was estimated at $ 2 trillion. As a result, the IPO was held on the internal exchange Tadawul. The organizers got the main profit from the initial public offering.

The company was valued at $ 1.7 trillion. Securities were placed at 8.5 US dollars. The main seller was the government of Saudi Arabia. As a result, $ 25.5 billion was raised. The next day, the capitalization rose above $ 2 trillion, but then began to fall dramatically. At the moment, the capitalization of the oil and gas giant is $ 1.9 trillion.

Investors are only interested in profitable business
This year’s IPOs were not very successful for various reasons. In some cases the companies were overvalued, in other cases investors simply did not believe in them.

At the beginning of last year, the American market was frozen due to the shutdown. As a result, Uber’s and Lyft’s listings were delayed. The market had to wait a long time, but the result was unfortunate. Despite good growth rates, the companies remain unprofitable; investors are not in a hurry to invest in them.

This year, more than 200 companies have entered the American market. In total, they have managed to attract 62.3 billion US dollars. Only 9 companies were able to raise more than $ 1 billion through an IPO.

The IPOs of the company that produces meat substitutes Beyond Meat (+ 300%) and the service Zoom Video (+ 80%) have become the most successful this year.

Analysts believe that in 2020, investors will continue to focus on the profitability of companies; business will have to pay more attention to this aspect.

Airbnb will have the brightest offering in 2020. The booking service is likely to choose a direct listing.

Interest in IPOs in London has fallen due to Brexit
The Brexit issue has reduced interest in an IPO in London. Last year, only 34 companies had listing there. This number has become the minimum one since 2009. On the whole, the British stock market lagged far behind other markets regarding the growth. The FTSE 100 index has increased only 13%, while the German DAX has grown 26%, and the S&P 500 – almost 30%.

Hong Kong’s IPOs are at high since 2010
Despite the doubts of experts, Hong Kong has shown considerable activity in the stock market. Thanks to an IPO on the local exchange, it was possible to attract more than 38 billion US dollars. This is a record figure since 2010.

Lifting the ban on the IPO for companies, which include shares of different classes, has become the main success factor. Hong Kong is a safe haven for the companies that have failed to raise funds in mainland China.

Alibaba’s IPO has become the largest since 2010. $ 11 billion was raised.
Experts believe that in 2020, Hong Kong will remain a strong platform in the field of an IPO. There are regulatory changes on it. Companies from China consider Hong Kong to be a priority platform for placing their securities.


The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group

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