Public offering landscape shows signs of reshaping
By Samantha Pearson in New York and Robert Cookson in,Hong Kong
Published: December 15 2009 02:00 | Last updated: December 15 2009 02:00

Last week was meant to be America's busiest week for initial public offerings so far this year.
But only half of the companies scheduled to list made it to Wall Street. One Chinese technology company was acquired while three others postponed their offerings, blaming "market conditions".
Of the four companies that did go public, only one, a hotel investment trust, managed to price in the expected range and trade higher.
IPO activity has fallen sharply in the US over the last year, reflecting the difficult economic legacy of the credit crisis. However, the question is also whether the US will ever regain its former dominance, as emerging markets bring an increasing number of companies to market - a trend that some analysts believe could continue.
Since records began in 1995, the US has ranked as the worldwide leader every year for the amount of capital raised through IPOs, with the exception of 2006 when the UK came first.
However, this year, Hong Kong has eclipsed the US for the first time and the UK has not even made it into the list of the top 10, according to data from Dealogic.
Scott Cutler, NYSE Euronext's head of listings in the Americas, says: "IPO activity in emerging markets is reflective of the growth in those home markets and those home exchanges and that will continue."
Meanwhile, China is in third position, after having raised $24.4bn through IPOs so far this year or 63 per cent more than last year. Exchanges in China and Hong Kong have collectively contributed just less than half of the total funds raised through IPOs worldwide this year.
Shanghai and Shenzhen, the mainland's two exchanges, were last month joined by Chi-Next, a new board for start-up companies that has been dubbed China's Nasdaq. Almost all the 28 stocks on the index more than doubled in price on the board's first day of trading, before plunging by the 10 per cent daily limit on the second day.
Beijing has also said it will finally start allowing foreign companies to list in China next year, reflecting its ambitions to open up the country's financial sector and transform Shanghai into an international financial centre.
HSBC, the global bank, is widely tipped to be one of the first foreign groups to list in Shanghai. Earlier this year, Stephen Green, HSBC chairman, said China was the bank's "natural home".
India has also moved up the rankings, taking into account dual listings, as has Brazil, which was boosted in October by the country's largest-ever IPO: the launch of Banco Santander's Brazilian subsidiary.
In spite of the flurry of listings on foreign exchanges, Maria Pinelli, Ernst & Young's Americas director of strategic growth markets, says the percentage of companies listing at home is likely to remain steady at about 90 per cent.
As such, economic growth in the emerging countries will have a direct impact on national IPO activity, she says. "In some of the more developed countries where the stock exchange has been around for more than three decades, most of those industries such as transportation, resources and financial services have already accessed the capitalized markets. They've already been there and done that."
So far this year, most IPOs have been in the industrial sector as state-owned Chinese companies have lined up to go public.
However, not all developing markets have experienced the same growth in IPO activity: IPO activity in Saudi Arabia has also declined.
Ms Pinelli says: "The issue there is the type of company and how long it has been in existence." As the world has emerged from the global crisis, cautious investors have been attracted by IPOs mainly from large companies or from those with a long history and a proven track record, she says.
Although the total amount raised through IPOs globally so far this year is slightly higher compared to the equivalent period last year, there has been a 36 per cent fall in the number of deals.
Regulatory issues have also played a key role in the changing world order. In June, the Chinese government lifted a nine-month IPO ban, prompting a flurry of companies to come to market. On the other hand, burdensome and costly accountancy regulation in the US, primarily through the enactment of the Sarbanes-Oxley Act in 2002, has been blamed for reducing IPO activity.
However, Peter Cardillo, chief market economist at Avalon, says the impact of regulation on IPO activity in the US has been minimal. "It's certainly very costly for corporations, whether big or small, but there have still been a lot of companies going public since 2002."
Although the US may not be able to regain its top spot, analysts still expect IPO activity to pick up in the US next year.
Scott Sweet, senior managing partner of IPO Boutique, believes that the recent spate of failed IPOs was due to problems specific to the companies involved rather than a sudden deterioration in market conditions.
He also says there is traditionally a higher number of withdrawn or postponed IPOs toward the end of the year as underwriters rush to get their companies to market.
According to Dealogic, the potential value of IPOs lost through withdrawals in the US is already higher this month than in any other month this year.
David DiPietro, president of the Signal Hill Capital Group, a boutique investment bank, says: "If everything doesn't work like clockwork you find yourself trying to price in the week of the 21st [of December] and that probably becomes a little bit more of a risky proposition. Do you really want to be trying to attract investors' attention around Christmas?"
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