LONDON (June 30): Companies around the world have raised almost half a trillion dollars by selling shares in 2014 so far - the highest total for the first half of a year since 2007, before the onset of the financial crisis, data showed on Monday.
Firms have flocked to issue equity thanks to record highs in stock markets and low volatility, while private equity firms have seized the opportunity to sell out of investments made before the crisis, capitalising on strong investor demand.
The surge in activity reflects investors' hunger for yield in a world of rock-bottom interest rates, a confidence in stock markets, and a focus away from emerging regions towards the developed markets that play host to many large companies requiring funds.
Total global activity in so-called equity capital markets (ECM) has hit $449.1 billion in the year to date, up 16 percent from the same period in 2013, Thomson Reuters data showed.
And it has been accelerating - $254 billion was raised in the second quarter, a third up on the first three months.
The market for initial public offerings (IPOs) has boomed, with the amount raised by companies worldwide soaring 60 percent to $107.2 billion in the first half, compared with a year ago.
Investors have focused on Europe, rushing to cash in on the region's nascent recovery and cheap money released by central banks, despite the turmoil in Ukraine which has delayed several listings by Russian firms.
The cash raised in European IPOs rose almost 250 percent to $41.2 billion. But there have been recent signs of cooling as, spoilt for choice, investors are getting more selective and turning away from businesses with the most questionable valuations.
"I personally think that in many ways the (IPO) market is at its healthiest at the moment," said Richard Cormack, co-head of ECM for Europe, Middle East and Africa at Goldman Sachs.
"At the start of the year the market was pretty euphoric. You then had a correction in April started by the sell-off in high-growth stocks in the U.S., which impacted IPO sentiment."
Wizz and wobbles
The financial sector has led the way for ECM activity with a fifth share of the market, driven by a slew of bank capital raises, including Deutsche Bank's 6.8 billion-euro rights issue, and sector stock market listings in the euro zone.
The listing of ING's insurance arm NN Group is set to be Europe's biggest of the year so far in terms of the firm's market capitalisation, with an expected value of roughly 8 billion euros following its debut.
But it hasn't all been plain sailing. NN Group's July flotation will come after a difficult few weeks for listings, with some struggling to attract investor interest in the bookbuilding process and trading down after their flotations.
UK holidays-to-insurance company Saga has fallen almost 7 percent below its issue price, while sister firm AA also fell the same amount in its first day of trading.
"The after-market performance of some IPOs has been sub-par and so given the number of deals in the market, investors are likely able to be selective," said Ed Sankey, global head of syndicate at Deutsche Bank. "They are polarising around certain transactions whilst steering clear of others."
The wobbles have led some firms to rethink their listings, with UK student firm Liberty Living, retail chain Fat Face and Hungarian airline Wizz Air all yanking flotation plans.
"Most companies will be waiting until the autumn now, and will be hoping market conditions remain supportive and perhaps a little less congested," said Tom Johnson, co-head of ECM Europe, Middle East and Africa at Barclays.
Alibaba treasure
Goldman Sachs ranked first globally for ECM deals by volume, with 221 deals totalling $43.3 billion, followed by BofA Merrill Lynch and JP Morgan.
It has proved a lucrative business for banks, with underwriting and advisory fees rising by a third to $10.9 billion worldwide. Goldman scooped the highest ECM fees, earning almost $826 million.
American IPOs rose a quarter on the same period in 2013, but with Europe stealing the show the U.S. market share fell to its lowest since 2011 - 25 percent, from 31 percent a year ago.
That could all change with Alibaba's monster float , after the China e-commerce juggernaut last week picked the New York Stock Exchange for its IPO, a coup for the bourse against fierce rival NASDAQ.
Despite Alibaba's decision to go abroad, Asian activity has almost doubled since the same period last year, helped by China reopening its markets following last year's ban. The world's No.2 economy is loosening its grip on listings as it shifts from an approval-based system towards a U.S. model.
This month the approval of four mainland Chinese IPOs drew huge demand.
($1 = 0.7359 Euros)