D.he market for IPOs has picked up significantly. While there were only two stock market debuts in Germany in September – that of the motorhome manufacturer Knaus Tappert and von Hensoldt, the former armament electronics division of Airbus – the third quarter was exceptionally lively overall.
After a weak first half of the year, the world’s stock markets recorded the strongest third quarter in 20 years with 447 IPOs and a combined issue volume of $ 95 billion. This is the result of an analysis by the auditing and consulting company EY. Compared to the same period last year, the number of debuts rose by around three quarters. The issue volume has more than doubled with a plus of 138 percent.
The third quarter is traditionally a rather quiet phase for IPOs, says Martin Steinbach, partner of EY. This year, however, everything is different, it is the strongest quarter of the year so far. Because of the Corona crisis, numerous issues were postponed in the first half of the year and the markets were flooded with liquidity at the same time. Stock indices had reached record highs.
The markets in China and the United States developed particularly strongly. In the Middle Kingdom (with Hong Kong) the issue volume grew by 139 percent to 46.4 billion dollars and the number of transactions from 86 to 217 (plus 152 percent). In America the volume nearly tripled to $ 33.1 billion. The number of IPOs rose from 38 to 85 – more than doubling. In Europe the development was less clear. The number of debuts rose by 56 percent to 39 issues and the volume by 51 percent to 6.2 billion dollars.
Above all, many new technology stocks
Technology companies in particular entered the market, followed by the healthcare industry. The corona crisis is strengthening the trend towards digitization, says Steinbach. It compares with $ 36 billion for technology stocks, well over a third of the total, with $ 17 billion for so-called healthcare stocks. The world’s largest IPO in the third quarter was the debut of the Chinese chip maker Semiconductor Manufacturing International, which brought in $ 7.5 billion, followed by that of the American software provider Snowflake with $ 3.9 billion and the real estate company KE Holdings, also from China, with $ 2 , $ 4 billion. The only IPO in Europe among the ten largest in the world was that of the British e-commerce provider The Hut Group with 2.4 billion dollars.
There were six share issues in Germany. Four – Siemens Energy, Hensoldt, Knaus Tabbert and Brockhaus Personal-Financial.com Management – chose the Prime Standard quality segment of Deutsche Börse for their listing. In terms of volume, Hensoldt was the largest transaction with 460 million euros. Two German companies – Curevac (proceeds: $ 245 million) and VIA Optronics ($ 94 million) went public in America. While the debuts in this country were rather meager, the IPO of the vaccine manufacturer Curevac was a complete success in times of Corona. The stock was issued at $ 16 and climbed to $ 56 on the first day of trading – a price increase of 250 percent. The price is currently similarly high. And while the share prices of Brockhaus Personal-Financial.com or Hensoldt are currently quoted below their issue prices, Knaus Tabbert are at least above, it compares 58 euros to around 62 euros.
According to Steinbach, the positive momentum in the third quarter, the existing liquidity and the high valuation level, coupled with comparatively low volatility and the investment pressure of investors, speak in favor of a year-end rally for IPOs. On the other hand, rising infection rates and continued tensions between China and the United States meant risks. The upcoming election in America and Brexit also caused uncertainty.
Planning an IPO is a real challenge in these times, says Steinbach. If volatility rises again, stock market candidates would have to be prepared for the fact that the window for share issues would quickly open – and then close again. Internationally, the discrepancy between the weak economic development and the high valuations among investors leads to fears that a bubble could form. This could lead to further reactions in the already turbulent stock market year.