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By Pablo Mayo Cerqueiro, Echo Wang and Elisa Anzolin
LONDON/NEW YORK, March 31 (Reuters) - A banking crisis and worries of a recession have dampened the outlook for initial public offerings (IPOs) this year, prompting companies to slow down their plans to go public in what is likely to result in lower fees for investment banks.
Despite a rebound in fundraising and block trading activity, year-to-date IPO volumes came in at their lowest level since 2019. Stock market flotations worldwide have raised close to $26 billion so far, according to data from Dealogic.
The lacklustre performance of some early IPOs, including that of German web hosting provider IONOS, combined with the stock market sell-off triggered by the collapse of Silicon Valley Bank, has forced several companies to delay the roll-out of their flotation plans.
Equity capital markets (ECM) advisers, however, are optimistic of a recovery in listing activity in the latter part of the year.
In the United States, IPO volumes jumped more than 50% from the fourth quarter of 2022, but were still 11% down from the same period last year.
IPOs briefly flickered back to life in February, as companies including solar tech firm Nextracker and Chinese sensor maker Hesai Group pushed ahead with their listings.
"Realistically speaking, we're looking at the back half of the year as a starting point (for an IPO market reopening)," said Keith Canton, head of ECM for the Americas at JPMorgan Chase & Co.
A bright spot for IPOs was the energy transition industry, where the pipeline is expected to remain robust, according to IPO bankers.
"We (also) expect some high quality and long-standing consumer assets to emerge once market volatility dissipates," said Daniel Burton-Morgan, head of the Americas syndicate for ECM at Bank of America.
Further cross-border deals, including the long-anticipated IPO of SoftBank Group Corp's British chipmaker Arm, may also help boost U.S. volumes in 2023.
RECOVERY DELAYED
In Europe, investment bankers said the market volatility spurred by the banking crisis is likely to affect the pipeline of deals.
"What's happened with banks has led to a big pick-up in volatility in equity markets. Enthusiasm has fallen back again, but there will still be IPOs before summer – it very much depends on the individual company," said Andreas Bernstorff, head of ECM in EMEA for BNP Paribas.
For instance, German lender OLB, backed by Apollo Global Management, and Swiss skincare specialist Galderma, have put their IPO plans on hold due to the current market conditions, according to people familiar with the matter.