Half of the companies that raised more than $ 1 billion in their initial public offering this year are trading below their listing prices, despite the strong stock markets around the world.
The destroyed IPO contains some of the most famous names to list, such as the United Kingdom. Food delivery app Deliveroo, another Food maker Oatly And Indian payment giant Paytm.
Their poor performance casts doubt on the reputation fixed to companies by large investors such as Softbank and Warburg Pincus and major underwriters such as Goldman Sachs and Morgan Stanley.
According to Dealogic data, 49% of the 43 IPOs that raised more than $ 1 billion this year in London, Hong Kong, India and New York are trading below the issue price.
By comparison, among the large IPOs listed in 2019, about 33% fell below the issue price in the first year of market, and 27% of IPOs priced in 2020 traded for 12 months. It was in the red later.
According to EY, the S & P 500 Index recorded a 24% return and the IPO raised $ 330 billion so far this year, a record high.
Paytm has fallen by more than 40% The first two days of trading were one of the worst debuts in Indian stock market history, with the biggest drop on the first day of the year’s massive listing. The FinTech Group, which raised $ 2.5 billion and was worth $ 20 billion, now has a market capitalization of $ 15 billion.
Deliveroo shares plunged 26% on the first day and are still below the listing price, but New York-listed shares are still below the listing price. Chinese Ride Hailing App Didi Chuxing It has decreased by more than 40%.
Despite regulatory warnings, the impact of the crackdown on Beijing’s technology, which began after Diddy’s listing in New York, was felt across the global stock market, with more than $ 1 billion listed in Hong Kong this year4. All of them went into the red.
Lagu Narain, Head of Investment Banking for Natixis’ Asia Pacific region, said: He advised banks not to set too high price targets to avoid embarrassing days of the fall, but said “often the issuer wants to go out with a big splash.”
Bankers on Paytm’s transactions said the company decided to set a new IPO record in India, discouraging more conservative long-term investors. This meant that some hedge funds received more allocations than expected before dumping their shares.
Goldman led 13 deals that raised over $ 1 billion this year, nine of which are currently in the red, including Didi and American. Retail trading platform Robin Hood. Six of the 14 transactions led by rival bank Morgan Stanley, including Paytm, were trading below the IPO price.
Individual investors are also hoping to sell out under pressure for greater returns, analysts said. James Thom, senior investment director at Abrdn, said the pressure from large backers is a “big part” of the high praise brought about by this year’s large transactions.
Investors have invested more than $ 2 trillion in private equity funds over the last decade, seeking higher returns than the public market. However, according to consultancy Bain, since 2009, US public equity returns are actually about 15% consistent with returns from US buyouts.
This equivalence puts pressure on private equity funds to recycle capital faster in order to move on to the next transaction.
Richard Cormac, co-head of Goldman’s Emea Equity Capital Markets, said the wider area of the IPO is doing well, even if “clearly outliers are negative.” He added, “I don’t agree with the accusations that there was a lot of wrong pricing.”
James Fleming, Global Co-Head of Equity Capital Markets at Citigroup, said: As policy makers become more hawkish and interest rate rises become more prominent, we’ve seen the risk of high-growth companies diminish and their growth-to-value priorities change. As a result, many stocks, not just IPOs, have fallen. “
But he said it New equity flood It has been published. “Never around the world, more than $ 1 trillion in shares have been issued each year. Then last year, $ 1.1 trillion in equity was issued during Covid. I see those numbers again. I thought it wasn’t, and here we’re approaching $ 1.5 trillion on Thanksgiving — these are extraordinary numbers. “
Additional Report by Chris Campbell in London
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