PwC: London dominates as European IPOs are boosted by natural resource demand in a hostile market

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Kyiv – 2 Aug 2011 – Companies in the mining and oil and gas sectors have dominated the initial public offerings (IPO) market in Europe. Hostile market conditions have dented the price and number of flotations, but there was still a 48% increase in the value of IPOs in Europe in the second quarter this year compared to the same quarter of 2010.

Investor demand for resources-driven growth has seen the IPOs of Glencore, the commodities trader and Vallares, the oil and gas venture, prop up the Q2 figures. The two London-based deals accounted for more than €8bn of the €13.4bn raised in Europe during Q2 2011, PwC’s quarterly IPO Watch Europe survey found.  Of the 134 IPOs in the quarter the five largest deals generated more than €9bn of the total.

European exchanges have continued to endure the fallout from concerns over Greece and elsewhere, with more reports of delays and postponements in the IPO pipeline. These concerns have fed into IPO pricing discussions, contributing to a reported fraying in relationships between the sell side community and investors.

Looking forward, the European countries under severe pressure to reduce their national debt will be contemplating substantial programmes to dispose of state-owned assets through IPOs. These opportunities may form a major draw for investors in the future, according to PwC.

Richard Weaver, head of capital markets, PwC said: “Turbulent market conditions have badly affected the IPO market across Europe in the second quarter, traditionally one of the busiest periods in the calendar in terms of value and volumes. Investors are being very selective in terms of growth story and very demanding on price. The major London deals have shown that the opportunities are still there for companies to get away, but they need a compelling growth story at the right price.”

On the international stage, there are still major IPO deals in the pipeline. A €1.4bn float of JSW Group a Polish coking coal producer, which took place in July, while two Spanish banks, Banca Civica and Bankia, are hoping to raise more than €5bn collectively.  

In the US, the value of IPOs exceeded €8.5bn for a second consecutive quarter with technology companies such as Yandex and LinkedIn contributing 36% of the proceeds raised.

London remains a key destination for primary IPO listings, but it is seeing increasingly fierce competition especially from Hong Kong.  London’s attraction to natural resources companies is a stark contrast to Hong Kong, which has become a magnet for consumer-driven brands such as Prada. 

PwC research predicts Hong Kong will host 110 IPOs in 2011 with a combined value of some €35bn.

Richard Weaver, head of capital markets, PwC, added, “Investors appear to have bought the Asian consumer story and seem willing to back the kind of valuations that go with that story.” 

 

Note to the Editor:

About IPO Watch Europe

IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK) on a quarterly basis.

Movements between markets on the same exchange and greenshoeofferings are excluded. This survey was conducted between 1 April and June 30 2011 and captures new market IPOs based on their transaction date. All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers LLP.

About PwC

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information.

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