BEIJING, Oct. 23 /Xinhua-PRNewswire/ -- The Zero2IPO Research Center -- the research arm of Zero2IPO Group -- recently released the "China Enterprises IPO Report Q3 2008" report. According to the report, domestic and overseas IPO activities have slowed down in Q3, featured by a notable decrease in both the number of listed companies and the amount of raised capital. The financial crisis is still looming over the capital market. Due to the sluggish market environment, VC/PE investors are confronted with the most difficult moment in recent years. This quarter, only a small portion of VC/PE investors succeeded in exiting investments. Worse still, IPO exit deals in Q3'08 were the lowest in number among the third quarters of 2006-2008.
Twenty-eight Chinese companies achieved IPO status during Q3 2008, raising a total of US$3.06B on domestic and overseas markets. On the yearly basis, both the number of IPO events and offer amount were the lowest for the recent three years. The average offer amount was only US$109.10M. Compared to Q3'07, the IPO events decreased 62.2%, while the offer amount and average amount decreased by 86.1% and 63.2% respectively.
By market, 10 companies successfully got listed overseas, raising a total of US$1.06B. However, the overseas offer amount and number of IPO events decreased by 70.6% and 85.9% year-over-year respectively. Although the domestic markets outstripped their overseas counterparts by attracting 18 enterprises with US$1.99B raised in Q3, the offer amount dropped 86.1% and IPO events decreased by 55.0%, respectively, over the same period of 2007.
VC/PE funds backed 10 of the 28 debuts. The 10 listings backed by VC or PE raised US$716M in total, including US$417M raised by four overseas listings and US$299M raised by six domestic listings. VC/PE-backed Chinese IPO events decreased by 19 and the offer amount decreased by 94.8% compared with those during the same quarter one year ago.
Table 1: IPO Events and Offer Amount by Market
Market Offer Amt. IPO Events Average
(US$M) (US$M)
Domestic 1,993.59 18 110.76
Overseas 1,061.17 10 106.12
Total 3,054.77 28 109.10
Source: Zero2IPO Research Center
Figure 1 Year-on-Year Comparison of IPO Events and Offer Amt.
(Please Click the Link in the bottom of the release)
Sluggish Overseas IPO Events and Offer Amount Fall into Decline
As the sub-prime loan crisis in the U.S. has spread and evolved into a global financial crisis during the third quarter of 2008, major indices on the overseas stock markets have continued to plummet, giving a heavy blow to the confidence of investors. With the recessive global economic recession, the overseas IPO number of Chinese enterprises has further reduced to an aggravated extent, demonstrated by the drop in listing number and offer amount. These figures have bottomed out in nearly past three years. During this quarter only ten China enterprises achieved IPO status on overseas markets, offering US$1.06B in total. The number of IPO events decreased by 24 compared to Q3'07 and by 2 in comparison to Q3'06. The offer amount dropped by 85.9% in relation to Q3'07 and by 77.4% in comparison to Q3'06.
Figure 2: Year-on-Year Overseas IPO Events and Offer Amount
(Please Click the Link in the bottom of the release)
The ten overseas IPOs were floated on HKMB (4), NYSE (3), SGX (2), and NASDAQ (1). Notably, China-concept new listings in Q3 account for over half of the total new listings on HKMB, SGX, and NYSE. In terms of industry distribution, most overseas China enterprises IPOs were spread amongst the Traditional sector. Other listings were distributed amongst the Services and Broad IT sectors.
Table 2: Overseas IPO Events and Offer Amt. by Market
Market Offer Amt. Percent IPO Percent Average
(US$M) Events (US$M)
HKMB 876.66 82.6% 4 40.0% 219.16
NYSE 110.30 10.4% 2 20.0% 55.15
SGX 65.82 6.2% 3 30.0% 21.94
NASDAQ 8.40 0.8% 1 10.0% 8.40
Total 1,061.17 100.00% 10 100.0% 106.12
Source: Zero2IPO Research Center
Table 3: Overseas IPO Events and Offer Amt. by Industry
Sector Offer Amt. Percent IPO Percent Average
(Grade 1) (US$M) Events (US$M)
Traditional 890.14 83.9% 6 60.0% 148.36
Services 101.38 9.6% 2 20.0% 50.69
Broad IT 69.65 6.6% 2 20.0% 34.83
Total 1,061.17 100.0% 10 100.0% 106.12
Source: Zero2IPO Research Center
Domestic listing has remarkably slowed down; many approved enterprises are still looking forward to a brighter future
The third quarter of 2008 has witnessed the low-level readjustment of large-cap stocks on Shanghai and Shenzhen Stock Exchanges, and stock indices have undergone an all-time low. As uncertainties spread against the background of an invasive overseas financial storm, China Securities Regulatory Commission has exercised a stringent control on IPO quota in order to maintain the stability of domestic capital market. A lot of new stocks have been authorized for IPO and are still awaiting a brighter future. The initial public offering has considerably slowed down.
In this investment environment, this quarter saw only 18 domestic listings raise US$1.99B. Both IPO events and offer amount dramatically decreased from the same periods of 2007 and 2006. The number of domestic IPO events decreased by 22 versus Q3'07 and by 3 versus Q3'06. The offer amount decreased by 86.1% and 67.5% from Q3'07 and Q3'06, respectively. By ownership, all the 18 enterprises except Shanghai bourse-listed China South Locomotive & Rolling Stock Corporation Limited are privately owned. These 17 privately owned enterprises collectively raised US$1.03B with an average of US$60.86M.
Notably, domestic markets slightly outperformed overseas markets both in respect to number of IPO events and total offer amount: 8 more listed companies and US$932M more offer amount.
Figure 3: Year-on-Year Overseas IPO Events and Offer Amount
(Please Click the Link in the bottom of the release)
Table 4: Domestic IPO Events and Offer Amt. by Market
Market Offer Amt. Percent IPO Percent Average
(US$M) Events (US$M)
Shenzhen
SME Board 1,034.65 51.9% 17 94.4% 60.86
Shanghai
Stock Exchange 958.94 48.1% 1 5.6% 958.94
Total 1,993.59 100.0% 18 100.0% 110.76
Source: Zero2IPO Research Center
In terms of industry distribution, Traditional sector continued to hold the dominant position. Thirteen out of the 18 listed companies originate from Traditional industry, representing 72.2% of the total listings. Apart from Traditional, Broad IT, Services and Bio/healthcare sectors saw debuts in Q3.
Table 5: Domestic IPO Events and Offer Amt. by Industry
Sector Offer Amt. Percent IPO Percent Average
(Grade 1) (US$M) Events (US$M)
Traditional 1,808.73 90.7% 13 72.2% 139.13
Broad IT 112.72 5.7% 3 16.7% 37.57
Services 47.16 2.4% 1 5.6% 47.16
Bio/healthcare 24.99 1.3% 1 5.6% 24.99
Total 1,993.59 100.0% 18 100.0% 110.76
Source: Zero2IPO Research Center
VC/PE Hard to Attain Exit Owing to the Turmoil in Overseas and Domestic Markets
The third quarter of 2008 has also witnessed the aggravation of the sub- prime loan crisis which has triggered a global financial crisis and a fluctuating period of overseas capital market. Chinese enterprises which intend to conduct an overseas IPO are forced to accept the increasingly aggravated market situation as well as restrictive regulations specified by the No.10 Document. In view of the domestic market, although Shenzhen Stock Exchange and Shanghai Stock Exchange have revised Regulations on Stock Offerings to shorten VC/PE lock-up period, the benefits are not so effective to fight against the aggravated climate. Initial public offerings of new stocks have slowed down and many enterprises have not yet been qualified for IPO, making it more difficult for VC/PE investment exit. This quarter saw ten VC/PE-backed overseas and domestic debuts offer US$716.44M in total. The number of IPO events decreased by 19 and the offer amount decreased by 94.8% in comparison to the same period last year, indicating the substantial decrease of VC/PE exit activeness. On the domestic markets, six VC/PE-backed debuts raised US$299.37M, accounting for 60.0% of the total IPO events and 41.8% of the total offer amount. Meanwhile, four VC/PE-backed overseas listings raised US$417.07M, representing 40.0% of the total IPO events and 58.2% of the total offer amount.
Table 6: VC/PE-backed IPO Events and Offer Amt.
Market Offer Amt. IPO Average
(US$M) Events (US$M)
Domestic 299.37 6 49.89
Overseas 417.07 4 104.27
Total 716.44 10 71.64
Source: Zero2IPO Research Center
Note: Since the first quarter of 2008, China Enterprises IPO Reports published by Zero2IPO Research Center have extended the research scope of overseas markets to 11 stock exchange markets, i.e. NASDAQ, NYSE, AIM, HKMB, HKGEM, SGX, CATALIST, TSE, MOTHERS, KOSDAQ, and FSE.
For more information please click:
http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=7533
About Zero2IPO Research Center
Founded in November 2001, the Zero2IPO Research Center provides a full range of business research reports and customized research solutions for investment professionals in the Greater China Region. Our research ranges from Venture Capital, Private Equity, IPO, M&A to TMT industries. The Zero2IPO Research Center sets itself apart from competitors as the most prestigious research institute in the Chinese VC and PE spheres.
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