Place and conquer

Last year was a good year for the IPO market

Global companies are increasingly increasing their capitalization through IPOs. Data published by British research group Dealogic shows that last year broke a record for the volume of initial public offerings in the world. The total volume of funds raised amounted to $213.9 billion. This was largely due to the activity of China, the United States and a number of European countries.

“Securities markets continued their global expansion in 2006,” said Gregory Eriksen, vice president of global market globalization at Ernst & Young. “We have seen an increase in placements and increased competition between exchanges for the right to conduct IPOs.” Pharmaceutical, technology and energy companies were the most frequently floated, according to Dealogic. However, the IPOs of only two banks helped China become the leader among countries in raising funds. Only Industrial & Commercial Bank of China Ltd. During the IPO, it placed assets worth $21.9 billion, and this became a record figure among financial companies. Bank of China Ltd. securities price amounted to $11.2 billion. The total volume of transactions by 155 Chinese companies reached $53.5 billion. Due to this activity of the Celestial Empire, Asia became the second region after Europe in terms of the volume of initial placements. The leader of the 2005 IPO - the United States - was in third place, as it attracted only $44.1 billion.

Over the year, American companies conducted a number of large IPOs, but in terms of volume they are significantly inferior to Chinese and Russian ones. In the list of leading hosting countries in 2006, Russia was in fourth place, ahead of Japan and behind China, the USA and the UK. Based on the results of concluded transactions, Russian companies were significantly ahead of American ones. For comparison: the largest IPO campaign in the United States was undertaken by MasterCard Inc., which placed its assets for $2.6 billion, and the leader of the Russian public offering was Rosneft , whose securities were valued at $10.7 billion.

The noticeable underperformance of former US companies from European and Chinese companies is largely due to onerous laws that impose too many restrictions on listing in the US. However, the head of the stock division of Wachovia Corp. Quinten Stevens believes that next year Americans will make up for lost time due to the active growth of initial placements. "Corporate earnings remain strong and monetary policy remains stable, so the market is favorable for new IPOs," Mr. Stevens said.

Experts are confident that a favorable environment for initial placements will continue on world markets in 2007. Russian investment bankers share a similar opinion. “This year may turn out to be even more successful for Russian companies wishing to conduct an IPO,” says Denis Kuznetsov, vice president of the capital markets department at Aton Broker. -- Many issuers postponed the placement of their shares at the end of last year due to the not very favorable market conditions. In addition to the already announced IPOs of banks, energy and telecommunications companies, companies from other sectors of the economy may appear on the public market. It is possible that companies will try to conduct an IPO right now, without waiting for the results of the parliamentary and presidential elections. In 2008, there may be a slight lull in the capital market in Russia.” “The IPO market will grow this year,” agrees Yaroslav Lisovolik, chief economist at Deutsche UFG. -- Russian companies are increasingly investing in fixed assets by placing their shares. Last year this share in the total volume was 3%, previously it was only 0.2-0.3%. According to our estimates, in 2007 domestic issuers will raise $19 billion through IPOs.”

Denis UVAROV, Natalia ROMANOVA