The Global IPO Market Continues to Gather Steam

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 |  Includes: AVGO, EM, MJN, STWD
by: Renaissance Capital IPO Research

Below is an except from Renaissance Capital's August Global IPO Review, which was issued on Sept. 1.

The IPO market continued to show signs of healing in August with 8 new deals pricing globally raising a total of $5.6 billion, which was more than double the total proceeds that 6 new issues raised in the year ago period. Two deals raised over $1 billion, including India's hydroelectric power development company NHPC and China's 11th largest brokerage China Everbright Securities. Also, commercial mortgage REIT Starwood Property (NYSE:STWD), which is backed by respected real estate investor Barry Sternlicht, eclipsed Mead Johnson Nutrition (NYSE:MJN) as the largest US deal in 2009 with its $810 million IPO. In terms of geography, Asia Pacific was the most active region with 5 deals raising $3.8 billion.

The top international performer that priced in August was leading Chinese crankshaft manufacturer Tianrun Crankshaft ($123mm deal size), which rose 42% on its first day of trading. Although shares have pulled back somewhat in the aftermarket, the company also remained the top overall performer for the month with a total return of 28%. Two PE-backed US deals, analog chip maker Avago Technologies (NASDAQ:AVGO) ($648mm deal size) and healthcare claims/payment processing network Emdeon (NYSE:EM) ($367mm deal size), also posted strong performances, rising 21% and 10%, respectively.

August's Largest Global IPOs

Company Market US$ Proceeds Return
China Everbright China $1,602.5 5.3%
NHPC* India $1,229.6 n/a
Starwood Property United States $810.0 -1.1%
Avago Technologies United States $648.0 21.3%
Adani Power India $633.2 3.2%
Click to enlarge

* NHPC began trading on Sept. 1

Even more encouraging than the uptick in overall IPO activity and performance, however, is the recent pick up in new filings, particularly in the US and Hong Kong. In the US, 24 new companies, including 9 PE-backed deals, filed to go public over the last two months. This nearly matches the 26 IPO filings in the prior ten months. Only 2 of the most recent new US filings have indicated a deal size of less than $100 million, indicating a propensity for larger IPOs in the coming months.

In Hong Kong, 6 companies have announced intentions to go public in September expecting to raise an estimated $4.8 billion in proceeds. This contingent is highlighted by engineering firm China Metallurgical ($2.3 billion proposed deal size) and the nation's largest drug distributor, Sinopharm ($1 billion).

While the US and Hong Kong along with mainland China will likely continue to dominate global issuance volume, recent IPO activity continues to show signs of broadening, a trend we identified in our 2Q09 global review. Korea completed its first IPO of 2009 with construction firm Dongkuk Structures & Construction's $200 million offering and two additional Korean deals, Tong Yang Life Insurance and spirit maker Jinro, are expected to raise a combined $1 billion in September. Additionally, sizeable IPOs are expected in Australia (carsales.com; $200mm offering) and India (Oil India; $544mm), the latter of which saw its first two >$100mm IPO's price in August after being dormant for 13 months.

Disclosure: No positions