Sept 27 (Reuters) - Bankers say an uptick in IPO activity towards the end of the quarter, helped by a strong run in stock markets, signals capital raisings may be set for a rebound the rest of the year.
The upptick would follow a 53 percent rise in global equity fundraising in the third quarter, boosted by large secondary sales in companies such as American International Group Inc , as new issuance suffered from widespread economic uncertainty.
“Most of this quarter it was game off and you wouldn’t have dared thinking about launching an IPO unless it was really fundamentally cheap,” said Adam Welham, head of European equities syndicate at Barclays.
“We are now in a very different stage where the possibility of deals coming to market is that much higher.”
Global equity fundraising volumes, including IPOs and secondary offerings, totalled $162 billion in the third quarter, up from $105 billion in the same period last year, according to preliminary Thomson Reuters data as of Sept. 27.
The increase came despite a 24 percent decline in global IPO proceeds. A total of 147 companies worldwide went public in the third quarter, raising $21.8 billion, compared to a year ago when 208 companies raised $28.8 billion through IPOs.
Lingering concerns about the global economy have led more investors to seek relative safety in follow-ons, rather than taking risk with offerings from unproven companies that are newly going public, bankers said.
“There has been a lot more follow on activity as investors want exposure to names that already offer decent liquidity,” said David Hermer, head of equity capital markets for the Americas at Credit Suisse.
A landmark $18 billion secondary offering for AIG by the U.S. Treasury Department, and Banco Santander SA’s $4 billion offering in the U.S. and Latin America boosted deal volumes.
Technology IPOs, which took a hit from Facebook Inc’s troubled stock market debut in May, began to recover in the third quarter, comprising nearly 60 percent of all deals during the period.
The quarter saw successful market debuts from several tech companies including security firm Palo Alto Networks Inc , travel software company Kayak Software Corp and online real estate listings provider Trulia Inc.
Next in line is software company Workday, which filed for a $400 million offering earlier this month.
“Market participants had thought IPOs for the technology sector were broken, but technology IPOs seem to be working again,” said Michael Goldberg, head of U.S. equity capital markets at RBC Capital Markets.
“In these growth tech companies there are still investors for the right growth stories and at the right price points.”
Goldman Sachs Group Inc has topped the global ranking of equity underwriting so far this year, retaining the top spot it held last year.
Citigroup Inc came in second, up from its No. 7 position, while Morgan Stanley ranked third, down from its No. 2 position last year.
Morgan Stanley, the lead underwriter on Facebook’s IPO, led the IPO league table so far this year, followed by Deutsche Bank AG.
Large sponsor-backed IPOs have largely been absent from the market since the first quarter of this year, as private equity owners held off on exiting their investments in the face of continuing market volatility.
With U.S. stock markets stabilizing in recent months, some companies may go public in the next quarter. Among private equity-backed IPO candidates being closely watched are Berry Plastics Group Inc and Realogy Corp, owned by private equity firm Apollo Global Management LLC.
The November presidential election may also create a smaller window for deals as companies scramble to launch their offerings beforehand.
“Fourth quarter windows will open and close quickly given seasonal holidays and incremental global geopolitical event risk,” said Phil Drury, co-head of equity capital markets in the Americas at Citigroup.
In Europe, markets remained relatively fragile but bankers said they saw increased investor interest for new issuance as stability returned.
Russia’s Sberbank was the biggest European share sale of the quarter. Russia’s Central Bank drew strong demand for its sale of a 7.6 percent stake in Europe’s third biggest lender, which raised $5 billion.
The quarter also saw a string of bloc sales as companies took advantages of market upticks to offload stakes. These included Ziggo NV, one of the few large completed European new listings this year, whose owners sold a further 682 million euros of stock in late July.
Russia’s second largest mobile phone operator, MegaFon is among the biggest deals slated for the fourth quarter, having earlier this month asked its local regulator for permission to list its shares in London.
Spain’s Telefonica SA also plans to list its German unit O2 in the coming months.
“If you have got a story that is sufficiently attractive then you have got a market now with which you can engage constructively,” said Darrell Uden, co-head of EMEA equity caital markets at UBS.
The market is still far from booming. Many other companies have been unable to bridge the gap in valuation between what the sellers had hoped to achieve and what investors were willing to pay.
German defense group Rheinmetall AG scrapped plans for an IPO of its car parts division KSPG. Siemens AG decided against floating its lighting unit Osram, saying it would spin it off instead.
Asia-Pacific stock offerings continued a gloomy path, posting a 57 percent slump in new issuance in the third quarter from a year earlier according to Thomson Reuters data, underscoring concerns about slower growth in China.
The IPO drought prompted bankers to focus on block deals, which had an 84 percent jump in volumes in the first nine months of 2012 from a year earlier.
Overall equity issuance in the region dropped 29 percent so far this year to $116 billion, the lowest level since 2009.
Hong Kong, the world’s IPO capital for two years running through 2010, had no new listings since pachinko parlor operator Dynam Japan Holdings priced a $200 million deal in late July.
Bankers said the market could recover after China concludes its once in a decade leadership transition in October, and if measures to bolster the U.S. economy take effect.
“Two months ago, investors were not looking at IPOs out of Greater China in general. Now the sentiment has somewhat improved and they’re willing to look at it on a case by case basis, but by no means are they rushing into the IPO market yet,” said Kester Ng, chairman of equity capital markets for Asia at JPMorgan in Hong Kong.
“More important to the Hong Kong IPO market is how China is coming along.”