Gloomy picture for IPOs at end of 2008

IPO Watch Europe, the PricewaterhouseCoopers survey tracking the volume and value of initial public offerings (IPOs) around Europe, paints an extremely gloomy picture across all of the main European exchanges, as they continued to suffer from the worldwide loss of confidence in the capital markets and highly volatile market conditions.

The survey shows a decrease in both volume and value of IPOs compared with the, already disappointing, third quarter of 2008, and a dramatic decrease in IPO activity compared to the fourth quarter of 2007. The fourth quarter typically displays strong IPO activity, but the fourth quarter of 2008 showed the lowest IPO activity since the first quarter of 2003, when market confidence was weakened by the uncertainty surrounding events in the Middle East.

There was a 73 per cent reduction in the number of new listings, with 64 in the fourth quarter of 2008 compared with 233 in same quarter of 2007, and an even steeper reduction in the new money raised, which fell from €29.1 billion in the fourth quarter of 2007 to just €1.2 billion in the fourth quarter of 2008. The largest two IPOs during the quarter accounted for 97 per of the total money raised, leaving just €32 million for the remaining 62. Many IPOs were admissions raising no new money.

The number of international companies coming to the European markets also declined significantly, with just seven international IPOs raising a total of €3 million. This compares with the €944 million raised by international IPOs in the third quarter of 2008 and €7.5 million in the fourth quarter of 2007.

PricewaterhouseCoopers says that the European IPO market is unlikely to improve before the fourth quarter of 2009 at the earliest.

There was a similar depressing story in the statistics for venture capital raised in the fourth quarter of 2008 by Israeli start-ups. In the fourth quarter, 109 Israeli high-tech companies raised $394 million, 22 per cent below the $503 million raised in the fourth quarter of 2007, and 34 per cent below the $600 million raised in the previous quarter.

The average financing round was $3.61 million, as against $4.37 million in the fourth quarter of 2007 and $4.83 million in the previous quarter.

Seventy-six companies attracted more than $1 million each. Of these, 18 companies raised $5 million to $10 million each, nine companies raised between $10 million and 20 million, and one company raised over $20 million.

Overall, the picture for 2008 was brighter, according to the IVC Research Centre, with Israeli VCs investing $780 million in Israeli high-tech companies, 38 per cent of the total amount invested in Israeli high-tech companies. This compares with $678 million or 39 per cent in 2007, and $651 million or 40 per cent in 2006.

In the fourth quarter, Israeli VCs invested $151 million, which accounted for a 38 per cent share of the total invested in Israeli high-tech companies. The remainder came from foreign investors as well as non-VC Israeli investors.

According to Efrat Zakai, Director of Research at IVC, “As predicted, 2008 was a record year in terms of capital raising, in large part due to numerous companies that sought sufficient funding to sustain themselves in the approaching recession. Israeli VC funds, working to support their portfolio companies, focused on follow-on rounds with less capital directed to first-time investments.”