Coronavirus forces bankers from IPO to emergency capital raises

Lockdowns in European countries stop stock market listings in March

LONDON: Not a single European company listed on the stock market in March as the coronavirus spread across the continent, with bankers now counting on fees from emergency share sales and rights issues to keep them in work for the rest of 2020.

Bankers working in equity capital markets – the business of raising funds via the stock market – are expecting a dreadful year for initial public offerings (IPOs) as fears about the scale of the economic fallout from the pandemic weigh heavily on global markets and hurt investor sentiment.

The year got off to a promising start with European listings raising $918 million in the first quarter of 2020, according to Refinitiv data, more than three times the $301.2 million in the year-earlier period when the region was grappling with political uncertainty around Britain’s departure from the European Union and a slowdown in the euro-zone economy.

But stock market listings abruptly stopped in March, the data shows, as one by one European countries introduced lockdowns to restrict the spread of the virus.

“Given the COVID-19 outbreak and its negative impact on global economic activities, IPO markets are not expected to quickly rebound,” said Paul Go, EY Global IPO Leader, adding that the best hope was for the market to attempt to reset during the summer months, despite these being typically slower.

That leaves bankers bracing for a bleak 2020 and counting on a pickup in fees from secondary transactions for listed companies who need to shore up their balance sheets by selling additional shares to ride out the crisis.

“Secondary transactions are very much the topic of discussions (with clients) - particularly how to get to market with speed and in size,” said Adam Farlow, head of Capital Markets Europe, Middle East and Africa at law firm Baker McKenzie.

“We are seeing numerous accelerated bookbuild transactions across the region and across sectors,” Farlow added.

Speedy trade

Such accelerated bookbuilds (ABBs) – where shares are offered within a short-time window with little or no marketing – had already proved popular at the start of the year, although for very different reasons.

With stock markets near all-time highs and private owners looking to cash out at attractive levels, ABBs rose 79% in the first quarter of the year, driven by activity in January and February, to the highest level since 2017, according to Refinitiv.

One standout trade was the Von Finck family’s CHF 2.3 billion ($2.4 billion) sale of a 12.7% stake in Swiss testing company SGS in early February. Credit Suisse managed the trade, the largest sole-led deal of its kind since March 2014.

Now companies are more likely to be looking for a quick cash injection to get through a difficult period.