Last week's free fall in the stock market took a momentary toll on the market caps of some large companies, but prices snapped back minutes later. More important for the economy and CFOs was the flock of initial public offerings that failed to take wing last week due to spikes in the Chicago Board of Exchange Volatility Index.
Globally, $6 billion of IPOs were postponed or withdrawn, and many companies cut their deal sizes substantially before pulling the plug. Chinese outfit New Century Shipbuilding shelved a $1.7 billion offering, real estate company Swire Properties canceled a $3 billion Hong Kong issuance, and U.S. REIT Americold Realty Trust pulled its $600 million coming-out party.
Another seven deals are scheduled to price this week, although the largest is $368 million, which may make it easier for bookrunners to attract investors. It may help also that the S&P 500 was up nearly 4% by Monday afternoon. Even if some of these deals make it to the market this week, though, their CFOs have to be uneasy. Of the 15 IPOs that have priced since the beginning of April, as of Monday only 5 were trading at or above their initial price.
In other capital-raising arenas, the stats last week were just as jarring: the spread investors demanded to hold corporate debt instead of government securities jumped 28 basis points to 177, according to Bank of America Merrill Lynch's corporate bond index. And in the bank market, three-month U.S. dollar LIBOR, upon which many loans are based, closed the week up 8.2 basis points.
Are these symptoms of a coming drought in liquidity that will drive up the price of equity and debt, or merely a temporary setback caused by investor fears of Greek contagion? Hard to tell. CFOs often proclaim that timing is not the crucial element when looking to raise funds. That's true, but this capital-raising environment bears close monitoring. The difference of a week or two can mean real money. |
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