OREANDA-NEWS. April 28, 2011. In a disappointing quarter for initial public offerings on European exchanges, deal values plummeted by 71% compared to Q4 2010 with a 27% fall in the number of floats taking place, reported the press-centre of PwC.

There were 94 floats completed in Europe during the last quarter, raising just under EUR 3bn but 129 IPOs in Q4 2010 generated more than EUR 10bn. These are the findings of PwC’s Q1 2011 IPO Watch Europe survey, which tracks the volume and value of IPOs. London hosted the lion’s share of IPOs, but future activity across the entire region remains uncertain.

Against a backdrop of continuing political and economic upheaval, jittery companies are now deciding whether to shelve their IPO plans or continue to forge ahead in stormy market conditions. 

Macy Coffey, Capital Markets Leader, Partner, PwC in Russia, comments on the situation in  Russia:

“Out of the four transactions that went to market in the first quarter, only HMS Group closed.  Nord Gold, ChelPipe and Koks pulled their deals unhappy with investors’ valuations.  Yet there is no shortage of new IPO transactions: Euroset, Nomos Bank, Rusagro and Etalon got to the pricing phase towards the quarter end.  The other names approaching their listings are mining and energy giant SUEK, Helicopters of Russia, shoe retailer CentrObuv.

The Japanese natural and nuclear disaster, violence in North Africa and Middle East and propelling oil prices are aggravating the market for the issuers. There was little sign of US investors participating in any of the European deals over the first quarter.

Yet leading IPO players register growing Russian IPO pipelines since the beginning of the year, which probably reflects the number of postponed IPO plans in 2009/10 as well as new business development plans and growing need for capital. No less than Russian 25 companies announced firm plans and started preparation for their listing for the next 12 months.  The principal IPO industries will include Internet services, mining, retail, manufacturing and agriculture”.

In London, there is also the further complication of the Easter Bank Holidays and the Royal Wedding prolonging the slump in activity, PwC says.

Richard Weaver, capital markets partner, PwC said:

“Q4 2010 seemed to promise a return to health but market conditions have deteriorated significantly against a backdrop of challenging worldwide political and economic conditions.

April and May are traditionally two of the busiest months in the IPO calendar but the continued market volatility coupled with the prolonged holiday period leaves companies with a tough decision to make.

They must either commit now, or postpone to a later date, hoping that investors will return to the market after the Royal Wedding flush with renewed optimism.”

The top five IPOs in Europe accounted for two-thirds of value raised this quarter, with three of these hosted in London. However, over recent days, several large companies such as BILT Paper and Topaz Energy and Marine have decided to pull floats and PwC has found many are being dissuaded by investors willing to pay significantly less than they had expected.

Richard Weaver, PwC, added:

“It’s a bitter pill to swallow for companies to be told that the value of their business has fallen dramatically from their initial valuation. Investors are now so wary that the price they are prepared to pay often doesn’t come close to matching sellers’ expectations.”