With the exception of last week, during which the markets responded favorably to Greek parliament´s decision to employ more recovery measures, the first quarter of the year has been one of the more volatile in recent memory. The Greek crisis, a slow deceleration of the US economy, revolts in the Middle East and a tsunami and nuclear crisis in Japan: this is a complicated economic context to work in for companies that decided to go public and take advantage of favorable views that analysts were giving at the beginning of the year.
Current facts are speaking louder than stale views. 60% of the European companies that went public earlier this year are valued beneath their IPO price, according to data compiled by Bloomberg. But despite everything, activity has been higher than in recent years: there have been more IPOs this year since 2008, but the cancellation level is at its highest since 2006. Even though global economic activity has increased, the markets sense that things are worse than they have been in a long time.
With these precedents, it remains clear that timing is critical, and very much so for IPOs. "When a company decides to go public, it is subject to the whim of the markets and investors perceptions. And the economic context is important considering that if there is little appetite for investing, there will be poor reception" affirmed Vidal Israel, the general director of Atlas DC Advisory Partners. Nevertheless, context is not the only factor that influences IPO success.
Also important are the company´s sector and the state of the European market in which it decides to go public. For example, the European companies who have increased the most since they went public are the French biotech company Biosynex (a mining and petroleum company closely tied to raw materials who nearly doubled their IPO price) and the German company Derby Cycle. Context would also explain why the rally in the Spanish risk premium (which has been tickling 300 basis points in the past few weeks) has led companies such as Atento and Ono to cancel their IPOs and led Bankia or Banca Cívica to reposition themselves.
Translated and Edited in English by Brandon Dyches and Jose L. De Haro
