Reflecting a global trend, the lucrative business for banks taking companies public has come to a virtual standstill on the SIX Swiss stock exchange.
There was no «true» initial public offering (IPO) on the SIX Swiss Exchange in the first quarter of 2023, with the only activity coming from two newly listed GDRs (Global Depository Receipts) from China.
With Zhejiang Hang Ke Technology Incorporated Company and Fangda Carbon New Material Co, two Chinese companies placed their depositary receipts on the Swiss Exchange with a volume of around 338 million Swiss francs ($367.5 million).
SIX has ambitions to become a magnet for the GDRs of China-listed firms, as finews.com reported in December. Zurich is particularly attractive to listed companies from China because Switzerland is considered politically neutral where companies can raise funds from foreign investors at a time when global stock issuances have evaporated.
From a Swiss perspective, investors are increasingly focusing on companies with sustainable business models. This trend emerged last year and has to do with the increased focus of investors on clearly formulated ESG goals, according to Tobias Meyer, head of transaction accounting and IPO Services at EY in Switzerland.
Volume at Three-Year Low
According to the latest «IPO Barometer» (in German) from EY Switzerland, the IPO drought is part of a global trend. Worldwide issuance volume was down by more than half in the first quarter, falling by 61 percent to its lowest level in three years. The number of IPOs fell eight percent to 299.
The US was the only major stock market with increased IPO activity, albeit at a still very low level. The Chinese market will see improvement over the course of the year, with a pipeline of IPO candidates of around 800 companies, from which more than ten mega IPOs are expected. For Europe, the outlook is more muted.
«The Chinese economy is regaining its footing after the pandemic, the U.S. economy is developing strongly, which will also benefit European companies. The Swiss economy is also developing fundamentally well.» The decisive factor, he said, is that the financial world calms down again and macroeconomic conditions improve, Meyer said.
Banking Crisis Making Itself Felt
He went on to say there is still a great deal of restrant among potential IPO candidates, citing continued economic and geopolitical fallout, coupled with banking sector turmoil. These headwinds continue to cloud the situation as seen by the sharp increase in volatility and price declines on the stock exchanges.
