HONG KONG/LONDON London luxury jeweller Graff Diamonds ditched its $1 billion (648.5 million pounds) initial public offering Thursday, adding to a chill that Facebook's botched IPO has cast over an already moribund global market for new listings from Hong Kong to New York.
In just 10 trading sessions, Facebook (FB.O) has plunged from an initial price of $38 a share to less than $27 at midday Thursday, wiping out roughly $30 billion in market capitalization, and offering a stark warning to any company on the fence about entering the public markets.
Globally, the amount raised from stock market flotations has slumped 46 percent this year compared with the same period of 2011. Excluding Facebook, 72 U.S.-listed companies have filed, raising proceeds of $13.1 billon, a 53 percent decrease from a year ago, according to Thomson Reuters data.
Hong Kong, one of the busiest listing venues in recent years, has seen a particularly dramatic drop, with deal volumes falling 85 percent in the first five months of 2012. And 12 U.S. IPOs have been withdrawn or postponed in May, as well.
"This has created a crisis of confidence," said Scott Sweet, managing partner at IPO Boutique, based in Florida. "The companies still in the pipeline will stay in the pipeline. There is no reason to rush out when the granddaddy of them all has come and gone and left an indelible negative impression."
The market slump is likely to put pressure on other planned IPOs, such as motor racing company Formula One's planned $3 billion Singapore listing. Despite expectations the deal will be priced next month, Formula One Chairman Peter Brabeck said last week he had yet to give the final go-ahead.
Graff, the fourth major IPO to be called off in Asia this week, had been due to price its Hong Kong offering on Friday, putting it on the verge of becoming Asia's biggest completed flotation so far this year. But investors balked amid concerns over the euro zone crisis and slowing economic growth in China.
The jeweller, which had planned to raise capital to help build a bigger Asian business centring on China, pulled its IPO as European and U.S. markets tumbled more than 1 percent on Wednesday. Markets were weak again Thursday, though speculation of IMF help for Spain helped ease losses.
CRISIS OF CONFIDENCE
This month, both Georgia's state railways monopoly and Russian real estate investor O1 Properties pulled planned London listings, blaming volatile markets as uncertainty over the future of Greece deterred investors from taking the risk of putting money into IPOs and emerging markets.
In the immediate aftermath of Facebook, Corsair Components and Tria Beauty both postponed U.S. offerings. Research firm Renaissance Securities said this month that American IPO filings and pricing were both down sharply this quarter.
"Anything that is out there is going to be subject to a valuation haircut. And the deals that are being postponed (are) at companies that are unwilling to undergo those valuation reductions," said David Menlow, president of IPOFinancial.
For now, though, and notwithstanding this week's spate of cancellations, some companies continue to press ahead with offerings in Asia.
On Thursday, Malaysia launched the biggest Asian IPO to hit the road so far this year: A $3 billion offer in Felda Global Ventures Holdings Bhd, the world's third-largest palm plantation operator. It is preparing for a market debut on June 28.
Felda is not expected to suffer the same fate as Graff. So-called cornerstone investors are taking about two-thirds of the shares, and the Malaysian government is using the sale to deliver a windfall of more the $500 million to tens of thousands of landholders ahead of an expected election.
The biggest IPO still in the Asian pipeline is Chinese state-owned insurer PICC Group, which plans to raise up to $6 billion in a Hong Kong-Shanghai dual listing. IPOs from Chinese state-owned entities could be less sensitive to market volatility because they tend to be supported by funds of other government companies and by China's sovereign wealth fund.
Deals from so-called defensive sectors such as utilities or high-dividend companies should also fare better in the current market, though no IPOs are considered easy sells, bankers said.
Meanwhile, there is a small ray of light in the European IPO tunnel: Spain's Telefonica (TEF.MC) said Thursday it would list its German unit, in a move to cut debt and potentially free up capital for dealmaking.
While those working in the market said the so-called IPO window could reopen later in the year, this would depend on China easing monetary policy and Europe finding some kind of resolution to its debt crisis.
"Bankers aren't very optimistic for the second half, it's going to be very difficult," said one Hong-Kong based capital markets lawyer.
(Additional reporting by Michael Flaherty and Clement Tan in HONG KONG, Rachel Armstrong in SINGAPORE, Stuart Grudgings and Yantoultra Ngui in KUALA LUMPUR, and Olivia Oran in NEW YORK; Additional writing by Ben Berkowitz in Boston. Editing by Alwyn Scott, Mark Bendeich, Alexander Smith and Bernadette Baum)