26 November 2007

NY to surpass London in IPO race

The amount of money raised through initial public offerings in New York is set to surpass London for the first time in three years as companies fuel a surge in IPO volume in spite of the turmoil in capital markets.

Money raised through stock market debuts in New York is set to hit levels not seen since the dotcom boom, with $51.3bn raised this year on the NYSE and Nasdaq combined, according to figures from Dealogic, the data provider. In London, debuts on the London Stock Exchange and Aim have raised $45.8bn in the year to date.

The figures suggest recent efforts to improve the regulatory regime in the US by introducing measures to make it less problematic for foreign companies to list in the US, for example, are paying off. However, London just eclipses New York in terms of the number of companies that have come to market this year, with 208 deals compared with 202 in New York.

The global battle between the exchanges to win new listings is becoming fiercer, with US and European exchanges looking increasingly eastwards to attract Chinese and Indian companies wishing to conduct stock market floats beyond their home markets.

The IPO market has been relatively robust this year. However, some signs are emerging that the recent credit market turmoil is starting to affect the appetite of companies considering going public. In the past two weeks, 11 companies that had planned to float their shares on US stock exchanges have either withdrawn or postponed their deals. This comes after a dozen IPOs, which had expected to raise a total of $2.5bn, were pulled in October.

Shares in Och-Ziff Capital Management, one of the world’s largest hedge fund groups, fell more than 4 per cent on their New York trading debut this month, suggesting investor enthusiasm for publicly traded alternative asset managers has waned. The stock, initially offered at $32, is trading at $23.50.

Och-Ziff’s IPO performance came in contrast to the debut of Fortress Investment Group in February, well before the credit squeeze began. Fortress, a hedge fund and private equity group with about $43bn under management, saw its shares rise 68 per cent on their first trading day. However, Fortress shares now trade slightly below their offering price. Shares in Blackstone, the private equity group that went public in June, are now also well below their $31 offer price.

© Graham Bishop