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Market selloff rattles IPO hopefuls with LeasePlan, Sonae dropping plans
[NEW YORK] The stock market rout claimed its first IPO victims on Thursday after LeasePlan Corp NV and Sonae SGPS SA shelved planned listings.
As the S&P 500 reached a three-month low and Europe's main equity index fell to the lowest since December 2016, companies aiming to sell shares on each side of the Atlantic started taking a step back from the capital markets, cancelling or postponing planned initial public offerings.
Vehicle fleet operator LeasePlan was the first to fall on Thursday, citing market conditions for its decision to abandon an IPO that could have valued it at as much as 7.4 billion euros (S$11.8 billion). Hours later, Portugal's Sonae said it wouldn't carry out the listing of its retail unit, Sonae MC, "due to current adverse conditions in international markets".
Tencent Music Entertainment Group, the online-music arm of China's largest social-media company that was aiming to sell shares in the US, is also pausing its IPO, according to a person with knowledge of the matter.
Companies - and their advisers - prefer to make their trading debuts into stable markets to avoid wild swings in the share price or being swept up in a rout. The Cboe VIX Index - a key measure of volatility that's known as Wall Street's fear gauge, jumped 57 per cent in two days to close at 24.98 Thursday.
In the 11 days since the start of the fourth quarter at least eight IPOs have been withdrawn or postponed, according to data compiled by Bloomberg.
Execution risk for banks keeps on rising, Portales Partners's Charles Peabody said after seeing reports that Tencent Music had delayed its IPO.
"Who cares how big the pipeline is if you can't execute?" Mr Peabody said.
Another big test will come over the next week, as Abu Dhabi's state-owned investment firm seeks investors for its IPO of Spanish oil company Cia Espanola de Petroleos SAU, known as Cepsa. The emirate's Mubadala Investment Co has seen muted demand for the shares so far, with large investors who usually place orders at the beginning of the process not yet doing so.