IPOs slump to lowest level since financial crisis after Facebook

, Daily Business Review


Initial public offerings in 2012 slumped to the lowest level since the financial crisis as signs of an economic slowdown and Facebook Inc.'s disappointing debut curbed demand and prompted companies to push back sales.

IPOs have raised $112 billion worldwide this year, the least since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year's level, while concern about China's economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from last year, as Facebook's IPO spurred a monthlong drought in U.S. deals.

With the possibility of $600 billion in U.S. spending cuts and tax increases that could cause another recession also weighing on the IPO market this year, the global backlog of potential offerings has now swelled to the largest year-end size since 2007, data compiled by Bloomberg and Ipreo show. That could set the stage for a rebound if lawmakers avert the so- called fiscal cliff, according to Credit Suisse Group AG and Barclays Plc, with companies from China Petrochemical Corp. to ING Groep NV poised to potentially move ahead with offerings.

"A lot of people have been very selective," Joe Castle, head of equities syndicate at Barclays, said at a briefing this month in New York. "If we see some deals go out early in the year that go well and trade well, then it feeds on itself for more volume to come out in the U.S. and on a global basis."

Europe Surge

In the fourth quarter, IPOs in western Europe surged more than fivefold from a year earlier to $5.71 billion, and U.S. initial offerings increased 15 percent to $8.8 billion, data compiled by Bloomberg show. First-time share sales in Asia fell by 46 percent to $10.9 billion, the data show. Globally, IPOs this quarter edged up to about $32.4 billion from $29.5 billion in the year-earlier period.

The annual global IPO tally declined for a second straight year as Europe slipped back into a recession, cutting the amount raised in the region by about two-thirds to $9.91 billion. In Asia, the biggest region for IPOs, proceeds fell by 43 percent to $46.7 billion. The U.S. total barely eclipsed last year's mark, even including the $16 billion debut of Facebook, the biggest technology IPO on record.

After Facebook fell as much as 32 percent in the first three weeks after its IPO, companies such as Party City Holdings Inc. and American International Group Inc.'s airplane-leasing unit pulled planned offerings in favor of private sales.

Swollen Backlog

The global IPO backlog swelled to about $115 billion at the end of this year, including a sale by Japan Post Holdings Co. that's planned for 2015, according to Ipreo, a New York-based provider of market data. Excluding that offering, the backlog would be about $65 billion, larger than the $52 billion a year ago, the data show.

"Many companies may have felt that the broader economic environment and their resultant earnings didn't represent the true worth of their businesses," Darrell Uden, co-head of equity capital markets for Europe, the Middle East and Africa at Zurich-based UBS AG, said in a phone interview. "Many chose to wait for a few more earnings cycles to ensure a better valuation."

U.S. lawmakers last week scrapped a proposed plan for higher taxes, stalling budget talks and fueling concern that the officials will fail to prevent tax increases and spending cuts from taking effect in January. President Barack Obama and the Republican-led U.S. Congress returned to Washington yesterday with five days left to reach a deal.

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