North American IPO market sees decline in first half of 2019

The US Federal government shutdown and subsequent SEC backlog and delay in activity in the IPO market caused a significant decline in North American offerings in the first few months of 2019, according to data compiled by global law firm Baker McKenzie.

What was expected to be a robust performance in the region with some highly anticipated mega-listings didn’t quite deliver. Activity did pick up, however, as the year progressed.

Indeed, North America is the only region to record an increase in deal value, with a 13 percent climb in domestic value and a 7 percent jump in cross-border listings in the first half of 2019. 

In spite of the continued Sino-US trade war, there was considerable demand from Chinese issuers to list on US exchanges, with 16 Chinese companies raising more than $2 bn on Nasdaq and the NYSE.

The appetite to float in North America is showing no signs of slowing down. Issuers are instead looking to current market and stock performances to gauge their debut offerings. When coupled with what is fast-becoming a more conservative approach to pricing, companies are pulling out all the stops to protect post-IPO performance. 

The underperformance of some highly anticipated listings in the markets has thrown up concerns around pricing and valuation of companies, particularly pre-revenue companies with no clear path to profitability. Subsequently, investor sentiment toward risk has shifted, compelling a re-evaluation of pricing structures among some of those set to debut.

North American exchanges also accounted for 31 percent of cross-border capital-raising with $3.5 bn, though this was down 62 percent against the same period last year, when North America saw a surge in high-value cross-border activity.

Christopher Bartoli, Baker McKenzie’s head of North America capital markets, notes: ‘The US Federal government shutdown may have stifled activity in the first few months of the year, but this is by no means a reflection of appetite.

‘While geopolitical and pricing concerns have impacted markets globally, the US is set to experience a burst of activity running right into the start of 2020. What we can expect to see, though, is more conservative pricing among issuers in an attempt to safeguard IPO performance.’