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* IPOs stymied by VIX "fear index" jumping over 40
* Several deals in Europe pulled
* Outlook mixed while investors are focused on macro themes
By Alex Chambers
LONDON, May 10 The euro zone's massive debt
intervention and rallying stock markets are unlikely to tempt
bankers to restart frozen initial public offering (IPO) plans in
Europe yet because volatility remains too high.
In Asia Swire Properties pulled its $2.7 billion Hong Kong
IPO, while closer to home smaller deals such as GSW Immobilien
have been derailed by the volatility, along with the sale of two
Spanish renewable energy companies, Engyco and Renovalia.
[ID:nWEA0049] [ID:nLDE6461PB] [ID:nTOE64505H]
And while Danish ambulance service group Falck said it is
pressing ahead with pre-marketing for its deal worth between
$1.6 billion and $1.8 billion, there is no certainty of a sale.
"We had four very volatile sessions last week, as the market
switched its focus from corporate earnings recovery to macro
stability and the imbalances within the euro zone," said Craig
Coben, head of European equity capital markets, at Bank of
America Merrill Lynch.
Equity markets bounced dramatically on Monday, with
Germany's Xetra .GDAXI and the UK's FTSE 100 .FTSE up around
5 percent, while France's CAC 40 .CAC40 was up nearly 9
percent after Europe's $1 trillion rescue package. [.EU]
But raising equity will take some time, with the Chicago
Board Options Exchange Volatility Index .VIX -- described as
Wall Street's fear gauge -- jumping to 41, twice the level at
which bankers typically feel comfortable.
"Sure, markets are bouncing right now, lets see how this
package goes. I think volatility is going to continue.
Uncertainty is not good for markets," said the head of equity
capital markets syndicate at a European bank.
For a graphic of the relationship between the VIX and IPO
activity please click on:
NOT EVERYBODY STRUGGLES
Bankers had started to feel hopeful that new issue volumes
would accelerate after a strong open to 2010, when $74 billion
of shares were placed globally -- four times first-quarter
supply seen in 2009. [ID:nN09165245]
"As long as the market is focusing on macroeconomic
stability at the expense of corporate earnings growth, the IPO
markets may struggle. It's a macro versus micro debate. Certain
firms are showing strong earnings recovery and resilient
business models," says Coben.
The last major deals to go through were Spain's travel
services company Amadeus (AMA.MC) with its 1.3 billion euros
offering and Polish insurer PZU's $2.7 billion issue.
But the two deals sold at the lower end of their price
ranges, illustrating the risk that a two-week marketing period
can suddenly make a cheap deal look expensive.
"The IPO market is open but it's not indiscriminate. It is
selective. Investors are prepared to consider new issues, but
the quality filter is high," said Coben.
"Notwithstanding the market turmoil, strong companies can
find a way to 'step between the raindrops' and go public during
those periods when volatility is more moderate," he said.
Syndicate bankers are looking at a combination of factors --
a lower VIX, lower credit spreads and stability in government
bond markets -- before the market comes back.
(Editing by David Holmes)