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Will There Be a Revival in the IPO Markets Soon - 170612

Will There Be a Revival in the IPO Markets Soon - 170612

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Published by proshareng
Initial Public Offerings (IPOs) always held out an attraction for capital markets – for one, it is the clearest indicator of a performing regulator focused on market development and linkages between the economy and the bourse.

At its core, it validates the foundational premise that the capital market represents the most important platform for raising cheaper funds for business to fund expansion and build a nation.

This premise is changing. Indeed, the role definition of the capital market has been expanded as we have sounded often and the Nigerian market must recognise this and configure it into the changes taking place to be able to truly reposition the market.

Flashback to 2006 – 2008 when IPO’s were virtually dropping from the sky; albeit under a poor regulatory environment - a position exploited by the market elite, who took advantage of the enthusiasm of investors and the compromised regulatory structure to exploit the boom.
Initial Public Offerings (IPOs) always held out an attraction for capital markets – for one, it is the clearest indicator of a performing regulator focused on market development and linkages between the economy and the bourse.

At its core, it validates the foundational premise that the capital market represents the most important platform for raising cheaper funds for business to fund expansion and build a nation.

This premise is changing. Indeed, the role definition of the capital market has been expanded as we have sounded often and the Nigerian market must recognise this and configure it into the changes taking place to be able to truly reposition the market.

Flashback to 2006 – 2008 when IPO’s were virtually dropping from the sky; albeit under a poor regulatory environment - a position exploited by the market elite, who took advantage of the enthusiasm of investors and the compromised regulatory structure to exploit the boom.

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Published by: proshareng on Jun 18, 2012
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Will there be a revival in the IPO markets soon? - 180612
www.proshareng.com
1
Will there be a revival in the IPO markets soon?
Sunday, June 17, 2012 / The Analyst / Proshare Research
Initial Public Offerings (IPOs) always held out an attraction for capital markets – for one,it is the clearest indicator of a performing regulator focused on market development andlinkages between the economy and the bourse.At its core, it validates the foundational premise that the capital market represents themost important platform for raising cheaper funds for business to fund expansion andbuild a nation.This premise is changing. Indeed, the role definition of the capital market has beenexpanded as we have sounded often and the Nigerian market must recognise this andconfigure it into the changes taking place to be able to truly reposition the market.Flashback to 2006 – 2008 when IPO’s were virtually dropping from the sky; albeit undera poor regulatory environment - a position exploited by the market elite, who tookadvantage of the enthusiasm of investors and the compromised regulatory structure toexploit the boom.
 
Category2006200720082009201020112012
TotalInitial Public Offer ( New Issues)62521000?88Public Offer (New Listings)10224144NA?54Rights Issues720524NA?38Total7947301680?
180The Nigerian Capital Market 2006 - 2012
Grand Total  Austin Laz-listed by introduction in Exchange in 2012
Source: Proshare Research/NSE 
 By 2008 when the crash occurred, the IPO market has not been able to make anyrecovery. The investing public has little confidence in such as most are now trading atN0.50k, delisted or facing going concern issues. The fact that the regulator failed theinvestor, did not undertake any post offer/listing assessment and sanctioned no one forprofessional responsibility – the confidence, trust and integrity of the vehicle iscompromised.However, the reality with the IPO market is not just a function of our peculiarirresponsibility. Globally, the appetite for IPOs has flagged in many nations’ economiesas well.After years of holding the top spot for the amount of money raised from initial publicofferings world-wide, Hong Kong's stock exchange's hold on new shares has droppedsharply this year. So far in 2012, Hong Kong is in eighth place, with $1.4 billion raisedthrough IPOs on its exchange, down from its position as No. 1 in the past three years.According to the
Wall Street Journal 
, the Nasdaq Stock Exchange, New York StockExchange and Shenzhen-Chinext are currently in the top three slots.
(
http://online.wsj.com/article/SB10001424052702303822204577464263469270318.htm
 ).
 
Early in 2012,
24/7 Wall St 
. evaluated and compiled a list of top IPOs to watch for in2012
(
http://www.leap29.com/sector_reports/view/27
). The highly pitched Facebook offer, touted asthe mother of all tech IPOs made the list; is still on a continuous southward move sincelisting
(
http://news.cnet.com/8301-1023_3-57441887-93/how-facebooks-zucked-up-ipo-just-killed-the-tech-bubble/ 
).
 The question now becomes legitimate to ask - Will the Facebook offer kill the IPO marketfor 2012?
(
http://www.businessweek.com/videos/2012-06-08/did-facebook-kill-the-ipo-market-for-2012
).
Only time
 
Will there be a revival in the IPO markets soon? - 180612
www.proshareng.com
2
will tell as the stock which was listed at $38 IPO price has gone down by $10.6 to $27.4as at 12
th
June, 2012, representing a loss of 
-27.89%
 
in a matter of weeks
.Other Comparative Examples across the Globe
The Brazilian market, well known for its boisterous level of IPO activity is reportedlyfacing a hard year.Recent reports affirm that European stock markets are open for deals again after aneight month drought but with investors still hurting from last year's poorly performingflotation’s and many companies not expected to be ready until later in the year, therecovery may be slow as a
 
n intensifying euro zone debt crisis rattled stock markets andinvestors.Germany may be the strongest country in the troubled euro zone. But it has a wholehost of its own problems. The country's erstwhile strengths have now become its majorweaknesses. Exports currently form over 40% of its GDP. German exports will thus beaffected as Europe forms about 60% of its market. A Greek default by itself would resultin direct losses to Germany of about £90bn. These potential losses would increaserapidly as more countries default in the euro zone. Germany's debt levels are about 81%of GDP. This is expected to remain above 60% for many years, and slowing GDP growthwill not help matters much.Spain, Europe’s fourth largest economy, asked finance ministers from the 17 euro zonecountries to rescue its banks, which have been crushed by bad land and property loans.The bailout was reported to have soured investors’ sentiments just hours after Europeanand Asian stock markets were buoyed by a massive 100bn euro debt deal.
(
http://news.sky.com/home/business/article/16244910
).
 
Looking Inwards - Nigeria
Back to the Nigerian IPO Market, a brief look at forty (40) stocks listed between 2008and 2010 reveals that thirty-seven (37) out of those stocks are trading below theirlisting prices while the remaining three (3) is trading otherwise. Twenty-one (21) of suchstocks are currently trading at the nominal price of 50kobo.
 
Compan(ies)ListingDatesNo of SharesListed(bln)ListingPriceCurrentPrice(15-Jun-2012) % Return
PNG 17-Mar-09 4,579.78 6.61 7.28
10.14%
MCNICHOLS 18-Dec-09 201.89 0.98 1.02
4.08%
CAPHOTEL 14-Aug-08 1,548.78 6.5 6.71
3.23%
SKYESHELT 26-Feb-08 20 105 100
-4.76%
 
Will there be a revival in the IPO markets soon? - 180612
www.proshareng.com
3
ETRANZACT 10-Jul-09 4,200.00 4.8 4.04
-15.83%
DANGCEM 26-Oct-10 17,040.50 135 108
-20.00%
NPFMCRFBK 1-Dec-10 2,286.64 1.5 1.07
-28.67%
RESORTSAL 23-Nov-09 13,175.73 0.95 0.5
-47.37%
BAGCO 9-Apr-08 6,215.00 4.09 1.94
-52.57%
GTASSURE 19-Nov-09 10,000.00 3 1.22
-59.33%
ABBEYBDS 21-Oct-08 4,200.00 3.89 1.44
-62.98%
PAINTCOM 2-Nov-10 792.91 3.9 1.44
-63.08%
IAINSURE 9-May-08 28,000.00 1.36 0.5
-63.24%
MULTITREX 1-Nov-10 3,722.49 3 1.1
-63.33%
MTECH 9-Jun-09 4,966.67 2.5 0.91
-63.60%
DANGFLOUR 4-Feb-08 5,000.00 15 4.9
-67.33%
GOLDINSURE 12-Feb-08 4,549.95 1.89 0.61
-67.72%
REGALINS 27-May-08 6,668.75 1.75 0.5
-71.43%
PORTPAINT 9-Jul-09 400 10 2.76
-72.40%
HMARKINS 22-Feb-08 6,000.00 1.94 0.5
-74.23%
UNIVINSURE 11-Feb-08 16,000.00 1.94 0.5
-74.23%
MULTIVERSE 8-Oct-08 4,261.94 2.15 0.5
-76.74%
HONYFLOUR 20-Oct-09 7,930.20 8.5 1.93
-77.29%
IHS 27-Jan-09 4,400.00 5.25 1.13
-78.48%
UNITYKAP 17-Dec-09 13,000.00 2.38 0.5
-78.99%
BECOPETRO 7-Oct-09 3,716.98 2.5 0.5
-80.00%
CHAMS 24-Sep-08 4,620.60 2.62 0.5
-80.92%
COURTVILLE 1-Apr-09 2,960.00 2.62 0.5
-80.92%
FTNCOCOA 23-Jul-08 2,200.00 2.85 0.5
-82.46%
AFROMEDIA 18-May-09 4,237.27 2.92 0.5
-82.88%
UNIONDAC 11-Sep-08 3,553.14 3 0.5
-83.33%
AFRINSURE 17-Sep-09 20,585.00 3.67 0.5
-86.38%
ASOSAVINGS 25-Apr-08 8,679.15 3.67 0.5
-86.38%
TANTALIZER 23-Jun-08 3,211.63 3.67 0.5
-86.38%
MTI 28-Nov-08 4,893.59 4 0.5
-87.50%
FIDSON 4-Jun-08 1,500.00 7.87 0.91
-88.44%
OMATEK 18-Jun-08 2,941.79 5.14 0.5
-90.27%
DAARCOMM 26-Sep-08 8,000.00 5.25 0.5
-90.48%
STARCOMMS 14-Jul-08 6,878.48 14.33 0.5
-96.51%
UHOMREIT 2-Jul-10 250.02 52.5 0.5
-99.05%
Source: Proshare Research/NSE 
The Nigerian IPO market can simply be described as technically and realistically deadsince 2009 till date; as the market is yet to witness any traction since the meltdown of 2008.

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