After what can only be described as a quiet start to the year in both New York and London, the market for initial public offerings (IPOs) shows signs of waking up.
However, uncertainty remains on issues ranging from the outlook for China’s economy to whether any recovery for oil prices is in prospect and further stock market falls globally in the opening days of February evidence that volatility has not gone away.
In the US, where not a single flotation priced in January, Bill Gates-backed gene editing company Editas Medicine this week became the first US IPO of 2016. Last year, 78 of the 170 companies launched into the US public markets were from the healthcare sector.
According to reports, the IPO – the first since Chinese lender Yirendai launched in the market on December 17 – the Massachusetts firm price shares at the lower end of its range, selling 5.9m shares for US$16 each, at the bottom end of its range, and raising a total of US$94.4m.
Chinese biopharma firm BeiGene promptly followed to become the second company to list in the US in 2016, pricing 6.6m shares at US$24 per share and raising around US$158.4m. The firm is a clinical-stage firm focusing on drugs for cancer.
Stick or twist?
Meanwhile, in the UK National Australia Bank’s (NAB) long-awaited spin-off of its Clydesdale and Yorkshire division has finally happened, leaving the lender to focus on its Australian and New Zealand businesses. Clydesdale priced at 180p per share, lower than expected and valuing the business at around £1.6bn (US$2.3bn).
The firm had to delay its IPO by 24 hours at the request of a ratings agency querying some of the information in its prospectus. The move means NAB no longer has assets in the UK. It’s not the only so-called challenger bank going public with Metro Bank – founded in 2010 to challenge the UK’s Big Four high street banks – still scheduled to float at the end of the month.
While the market appears to be perking up, ongoing market volatility means more companies are expected to delay or postpone their flotations this year. A Financial Times report cited one banker who suggested that falling equity prices meant that more investors would see greater value in outstanding shares than in new offerings. That could mean that those companies that decide to persevere with an IPO and defy market volatility would need to be realistic with their valuations.
There has been an uptick of treasurers inquiring about interest rate risk management in recent months as interest rates in the US and UK have started to show a rise in momentum, said Chatham Financial at the annual Bellin treasury conference.
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