* Graff is fourth major Asian IPO to be scrapped this week
* Investors fret over Europe debt crisis, slower China
* Graff decision casts doubt on Formula One, other IPOs
By Elzio Barreto and Kylie MacLellan
HONG KONG/LONDON, May 31 London luxury jeweller
Graff Diamonds ditched its $1 billion initial public offering
Thursday, adding to a chill that Facebook's botched IPO has cast
over an already moribund global market for new listings from
Hong Kong to New York.
In just 10 trading sessions, Facebook has plunged
from an initial price of $38 a share to less than $27 at midday
Thursday, wiping out roughly $30 billion in market
capitalization, and offering a stark warning to any company on
the fence about entering the public markets.
Globally, the amount raised from stock market flotations has
slumped 46 percent this year compared with the same period of
2011. Excluding Facebook, 72 U.S.-listed companies have filed,
raising proceeds of $13.1 billon, a 53 percent decrease from a
year ago, according to Thomson Reuters data.
Hong Kong, one of the busiest listing venues in recent
years, has seen a particularly dramatic drop, with deal volumes
falling 85 percent in the first five months of 2012. And 12 U.S.
IPOs have been withdrawn or postponed in May, as well.
"This has created a crisis of confidence," said Scott Sweet,
managing partner at IPO Boutique, based in Florida. "The
companies still in the pipeline will stay in the pipeline. There
is no reason to rush out when the granddaddy of them all has
come and gone and left an indelible negative impression."
The market slump is likely to put pressure on other planned
IPOs, such as motor racing company Formula One's planned $3
billion Singapore listing. Despite expectations the deal will be
priced next month, Formula One Chairman Peter Brabeck said last
week he had yet to give the final go-ahead.
Graff, the fourth major IPO to be called off in Asia this
week, had been due to price its Hong Kong offering on Friday,
putting it on the verge of becoming Asia's biggest completed
flotation so far this year. But investors balked amid concerns
over the euro zone crisis and slowing economic growth in China.
The jeweller, which had planned to raise capital to help
build a bigger Asian business centring on China, pulled its IPO
as European and U.S. markets tumbled more than 1 percent on
Wednesday. Markets were weak again Thursday, though speculation
of IMF help for Spain helped ease losses.
CRISIS OF CONFIDENCE
This month, both Georgia's state railways monopoly and
Russian real estate investor O1 Properties pulled planned London
listings, blaming volatile markets as uncertainty over the
future of Greece deterred investors from taking the risk of
putting money into IPOs and emerging markets.
In the immediate aftermath of Facebook, Corsair Components
and Tria Beauty both postponed U.S. offerings. Research firm
Renaissance Securities said this month that American IPO filings
and pricing were both down sharply this quarter.
"Anything that is out there is going to be subject to a
valuation haircut. And the deals that are being postponed (are)
at companies that are unwilling to undergo those valuation
reductions," said David Menlow, president of IPOFinancial.
For now, though, and notwithstanding this week's spate of
cancellations, some companies continue to press ahead with
offerings in Asia.
On Thursday, Malaysia launched the biggest Asian IPO to hit
the road so far this year: A $3 billion offer in Felda Global
Ventures Holdings Bhd, the world's third-largest palm plantation
operator. It is preparing for a market debut on June 28.
Felda is not expected to suffer the same fate as Graff.
So-called cornerstone investors are taking about two-thirds of
the shares, and the Malaysian government is using the sale to
deliver a windfall of more the $500 million to tens of thousands
of landholders ahead of an expected election.
The biggest IPO still in the Asian pipeline is Chinese
state-owned insurer PICC Group, which plans to raise up to $6
billion in a Hong Kong-Shanghai dual listing. IPOs from Chinese
state-owned entities could be less sensitive to market
volatility because they tend to be supported by funds of other
government companies and by China's sovereign wealth fund.
Deals from so-called defensive sectors such as utilities or
high-dividend companies should also fare better in the current
market, though no IPOs are considered easy sells, bankers said.
Meanwhile, there is a small ray of light in the European IPO
tunnel: Spain's Telefonica said Thursday it would list
its German unit, in a move to cut debt and potentially free up
capital for dealmaking.
While those working in the market said the so-called IPO
window could reopen later in the year, this would depend on
China easing monetary policy and Europe finding some kind of
resolution to its debt crisis.
"Bankers aren't very optimistic for the second half, it's
going to be very difficult," said one Hong-Kong based capital