2019 IPO market could be a big one

2019 could be one of the biggest years for initial public offerings since the dot-com pinnacle in 2000 if several well known companies take the plunge into the capital markets.

"There is a long backlog of companies waiting for the IPO (initial public offering) window to open. That includes 'mega IPOs' like Uber, Lyft, Pinterest, and GE Healthcare in the US, as well as large international IPOs like Didi Chuxing and Bytedance (China). Because of the number of these mega IPOs, it's possible that 2019 will surpass 2018 in proceeds, especially if (stock) markets recover," said Matthew Kennedy, senior IPO market strategist for Renaissance Capital, a Greenwich, Connecticut-based provider of institutional IPO research.

Martin Steinbach, head of IPO listing services for the consulting concern EY (Ernst & Young) in Germany, expects a cautious start with activity increasing in the second half.

"While 2019 IPO deal numbers could be below those recorded in 2018, it is likely that global proceeds could meet or exceed 2018 levels, particularly if a greater number of unicorn companies and more companies from the technology, industrials, consumer products and health-care sectors come to the public capital markets as expected. We expect the share of IPOs between geographic areas to remain roughly the same," he said.

Alex Ibrahim, head of international capital markets for the New York Stock Exchange (NYSE), a unit of the Intercontinental Exchange, predicts a strong IPO market for Chinese companies in 2019 while European countries continue to work through "a lot of change". He said elections in Brazil and questions over political stability in Argentina will "linger over Latin America ... (but) we may see more transactions in Mexico."

Ibrahim said the NYSE recorded over 72 IPOs in 2018 that raised over $30 billion despite elevated volatility in US equity markets especially in the fourth quarter.

"We hope to see a continuation of this in 2019," Ibrahim said. "A lot of transactions were delayed — particularly in October when the stock market was especially volatile. Some of those companies are planning to come to the market in 2019."

There were 17 IPOs for Chinese companies on the NYSE in 2018 including Tencent Music Entertainment and electric carmaker NIO. Both raised about $1 billion.

While the fourth quarter in 2018 was weak, the year ended as expected with activity held back by geopolitical tensions, trade tensions among the US, China and the European Union (EU), and the looming exit of the United Kingdom from the EU, said EY's Steinbach.

"Our IPO Index has seen its biggest decline since February 2016, and that preceded the IPO market's slowest year since the financial crisis. Our International IPO Index has recently had similar underperformance. So it's safe to say that we'll have a slow start in 2019. And that should be true of the global IPO market," added Kennedy of Renaissance Capital.

The IPO market can offer clues not only to the status of a stock market but also a country's economy. "When the IPO market is strong, there is a connection to how a country's economy is functioning," said Ibrahim.

"Strong economies produce strong IPO markets. Generally speaking, when the stock market is humming, the IPO market is too," Kennedy said.

Contact the writer at paulwelitzkin@chinadailyusa.com