September 27, 2018 / 11:36 PM / 24 days ago

Global equity raising slumps, European bankers eye big floats

LONDON (Reuters) - Europe was the worst performing region for equity raising proceeds in the third quarter, according to Thomson Reuters data, as a strong performance in Asia failed to undo a global slump in issuance.

Global equity capital markets’ (ECM) proceeds fell to $543 billion in the first three quarters of the year from $563 billion in the same period of 2017.

Asia offerings helped to balance a slump in Europe, where activity was stymied by an absence of the massive bank rights issues seen in 2017. In the third quarter, European ECM fell 63 percent to $19 billion, while global ECM proceeds fell 31 percent to $134 billion.

A banking source who declined to be named said the poor performance of some stocks following share sales - including British bank RBS (RBS.L) and financial technology firm Adyen (ADYEN.AS) - dampened investor sentiment in Europe.

“The one bright spot is IPOs. The ones we’re looking at are big in size, whereas last year the IPO flow was more scattered and small and there was investor fatigue toward year end,” said Samuel Losada, head of Europe, Middle East and Africa (EMEA) ECM at Bank of America Merrill Lynch (BAC.N).

Starting in late 2017, a string of European IPOs were canceled, with bankers often citing market conditions or a mismatch in price expectations between buyers and sellers.

Most notably Saudi Aramco shelved its plan to sell $100 billion worth of shares, a deal aggressively chased by ECM bankers battling for league table positions.

“IPO markets will need to digest a lot of issuance over the coming weeks and months and long only investors are driving this. They are however very sensitive to price,” Losada added.

Goldman Sachs (GS.N) was the top bookrunner for ECM and IPOs globally, beating fellow Wall Street bank JP Morgan (JPM.N) which came top last year.

SETTING THE TONE

Swiss packager SIG Combibloc SIGN.UL and British peer-to-peer lending platform Funding Circle are scheduled to make their market debut on Friday and are expected to set the tone for a string of deals currently in the market.

Early October would see Mubadala-backed Spanish energy company Cepsa and British car maker Aston Martin go public in multi-billion dollar floats.

But with U.S. midterm elections and crucial summits to decide Britain’s future relationship with the European Union in the coming weeks, companies may have just a small time frame in which to do deals.

The initial public offering of Volkswagen’s truck and bus unit is expected to be among the biggest of 2019, driving proceeds of more than 6 billion euros to its parent company Volkswagen AG VOW_p.DE.

Bankers pointed to an outflow of global funds from Europe, with capital instead favouring the United States, which has a better growth forecast. Hoping for a reversal of this trend, London-based bankers said investors may soon see European IPOs as a good opportunity to pile back into the continent.

“The volumes are sustainable and because of a number of jumbo IPOs coming up, there may be an upside. Merger and acquisition financing may also help bring up issuance,” said Suneel Hargunani, head of EMEA equity syndicate at Citigroup (C.N).

Reporting by Dasha Afanasieva; Editing by Gareth Jones

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