Written By Banking risks have continued to pose a major challenge to the global IPO market’s recovery, as investors remain cautious amidst ongoing economic uncertainties. With the COVID-19 pandemic still wreaking havoc on economies worldwide, companies looking to go public are facing unprecedented challenges and heightened scrutiny from prospective investors. In this blog post, we’ll take a closer look at some of the key banking risks that are hindering the growth of the global IPO market and explore how these factors may impact your investment decisions moving forward. So buckle up and let’s dive into this critical issue!
Background of the global IPO market
The global IPO market has been struggling to recover from its weak start in 2016, as banking risks continue to weigh on investor sentiment. According to Dealogic, the number of global IPO filings decreased by 41% in 2017 compared to the previous year. While some of this decline can be attributed to pending U.S. regulations, a lack of attractive investment opportunities is likely also playing a role.
Nonetheless, some success stories have emerged in recent months. In March, Germany’s Deutsche Bank agreed to sell its consumer finance business to France’s Natixis for €14 billion ($16 billion). This deal was one of the largest European IPOs since the financial crisis and is expected to help revive the flagging global IPO market. Elsewhere, China’s WeBank completed its $13 billion acquisition of South Africa’s ANZ Bank earlier this year, marking another notable milestone for the global IPO market.
Nevertheless, there are still many hurdles remaining for the global IPO market to fully recovery. Banks are still reluctant to relaunch their businesses amid growing regulatory risks and subdued economic conditions. Additionally, there remains a shortage of quality investment opportunities that appeals both to private investors and listing boards.
Banking risks remain a major issue for issuers
The global IPO market’s recovery has been hampered by a number of banking risks, including high levels of uncertainty around the sovereign debt crisis in Europe and slowdown in China. This has caused issuers to cautious about committing to an offering and has decreased the number of deals that have been done so far this year. While there are a few exceptions, including E-Trade Financial Corporation (ETFC) and Strayer Education Inc (STRA), the majority of banks issuing IPOs have taken on significantly more risk than they had in past years. This is likely to continue as banks focus on their core businesses and refrain from taking on new risk.
There are a few factors that are contributing to the banking risks. One is that investors are placing greater emphasis on safety and liquidity when making decisions about which companies to invest in. Another is that many banks are still trying to recover from the financial crisis, which may mean that they are taking on too much risk given their current situation. Finally, some issuers may be gambling that regulators will not impose any major consequences for having too much risk in their filings, but this is an uncertain bet given recent events.
Overall, the banking risks remain a major issue for issuers, limiting the amount of money that can be raised through IPOs. Unless these risks start to decrease or there is another financial catalyst supporting lending activity, we expect 2018 to be slower than 2017 in terms of deal activity.
Continued deleveraging by banks will continue to weigh on the global IPO market
The global IPO market is continuing to struggle as banks continue to deleverage. This has had a negative impact on the number of IPOs that have taken place this year, and it is likely that the trend will continue into 2016. In 2015, there were only 12 IPOs worth $1 billion or more, which was well below the 38 IPOs that took place in 2014. The number of deals worth $500 million or more was also down from the 24 that were completed in 2014. There are several factors contributing to this decline in the IPO market, including concerns about bank lending and the overall economy. It is uncertain whether or not this trend will change in 2016, but if it does, it could provide a boost to the stock market.
Conclusion
The global IPO market is still struggling to get back on its feet, and banking risks are continuing to weaken the market’s recovery. It appears that investors are becoming more cautious about launching new companies, which could lead to a slowdown in the overall economy. Despite this obstacle, some innovative startups have found success by coming up with creative ways around these issues. Ultimately though, it will take time for the global market to recover completely, and banks need to do their part by providing a stable financial environment for companies looking to go public.
