25 October 2007
The number of companies seeking to list publicly on South Africa’s stock exchanges increased from two to 17 in the third quarter of 2007 as compared to the same period last year, in what professional services firm Ernst & Young has described as a “listings boom”.
This rise in local initial public offerings (IPO) is in sharp contract to the global picture, where listings declined by 22% in the third quarter as compared with the second quarter of 2007, mainly as a result of the sub-prime crisis fallout in the United States.
“South Africa saw 17 IPOs, with R1.6-billion of capital raised during the third quarter of 2007,” said Ernst & Young Transaction Advisory Services associate director Stef Greeff.
“This represents a significant increase when compared to the six IPOs of the previous quarter (with R1.0-billion raised) and the two IPOs in the third quarter of 2006 (R50-million raised) and also confirms that South Africa is indeed experiencing a ‘listings boom’.”
Thirteen of the IPOs during the third quarter of 2007 were on the JSE’s alternative exchange board, the AltX, taking its number of listings to more than 60 since inception.
According to its website, the AltX is designed to appeal to a diverse range of companies, including young and fast-growing businesses including start-ups, family-owned businesses, black economic empowerment companies and junior mining companies.
South Africa’s massive infrastructure development programme and 2010 Fifa World Cup preparations are also having a positive effect on listings, with Ernst & Young pointing out that 10 of the IPOs during the third quarter were construction or related companies, with the firm itself advising three construction-related companies on their listings.
Ernst & Young states that US$57-billion was raised in 428 IPOs globally in the third quarter, a decline of 36% when compared to the previous quarter, but 27% higher than the same quarter in 2008.
Brazil, Russia, India and China together raised $27-billion in a record 118 IPOs and accounted for seven of the 10 largest IPOs in the third quarter.
Overall, China, Brazil and the US led activity by capital raised, and made up 56% of the global total with $14.4-billion, $9.3-billion and $8.3-billion respectively. China also led number of IPOs with 77, surpassing last quarter’s leader Australia (50) and the US (36).
As per the second quarter of 2007, financials was the dominant industry sector, with a quarter of all capital raised by financial companies, followed by energy and power (14%), industrials (14%) and materials (12%). By number of listings, materials companies still led the way with a 20% market share of IPOs ahead of industrials (16%), and high technology (14%).
“The global IPO markets still remain strong despite a drop in activity,” said Ernst & Young IPO Initiatives global director Gil Forer.
“The record number of IPOs in the emerging markets shows that international investors continue looking for high return opportunities, as emerging markets are driving global economic growth. Thirteen of the Top 20 IPOs were from emerging markets, and interestingly only two of those chose not to list on domestic exchanges.”