Sliding global stock markets have forced over a dozen companies to shelve initial public offerings so far this month as volatility spikes close to levels seen during the depths of the financial crisis.
Underlining how choppy equity markets are affecting global businesses, 14 companies have had to shelve flotation plans in the 11 trading days since the turn of the month, according to PwC.
The US was the worst affected with nine IPOs withdrawn by companies, which float shares to raise money for investments and growth.
Thirteen Chinese flotations went ahead out of 34 that were successfully sold this month.
US companies that were forced to pull IPOs this month included Midland Sates Bancorp, employee benefits managers WageWorks and oil and gas company Enduro Royalty Trust.
“Markets went into a tailspin in August and we haven’t been able to shrug that off completely,” said Dan Cummings, head of global equity capital markets at Bank of America Merrill Lynch.
“Everyone has access to real-time information on global events so if the US is experiencing problems, or a eurozone country is struggling, it affects all markets,” he added.
The Chicago Board Options Exchange Volatility index, or Vix, popularly known as Wall Street’s “fear gauge”, jumped 28 per cent to 40.4, within striking distance of the three-year high of 48 touched on August 8.
The Vix reflects a market estimate of future volatility through options trading.
IPOs are particularly tough when markets are volatile as it makes it difficult for bankers and investors to correctly value a company.
To hedge against any potential falls, investors often require cut-price deals to commit capital, which many companies are unwilling to accept.
“In contrast to the renewed optimism observed in the first half of 2011, expectations for the full IPO year may take a hit,” said Mark Hughes, capital markets partner at PwC.
“Despite the challenging market conditions, there remain opportunities for companies to float but they need a compelling growth story and at the right price,” he added.
Corporate credit markets were also rattled on Thursday, particularly in Europe, which remains gripped by a sovereign debt crisis along its periphery.
Riskier assets, such as high-yield bonds, were hit by mounting concerns over the creditworthiness of these predominantly smaller or more indebted companies.
The iTraxx Europe Crossover index, which tracks the cost of insuring against default of an underlying group of high-yield bonds, spiked to 647 basis points, the highest since after Lehman collapsed.
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