Through June, 333 companies went public globally, down from 702 a year earlier, according to data compiled by Bloomberg. The $73.2 billion raised was 41 per cent less than during the first half of last year and the least since 2005. For the first time since 1978, the US venture capital funds failed to take a company public last quarter.
Investors are leery of betting on newly public companies because the global credit crunch is weighing on consumer confidence. IPOs are one of Wall Street's most profitable businesses, and the slowdown has cut underwriting fees by almost 50 per cent to $2.42 billion, Bloomberg data shows.
The average fees for the first half of 2008 were 3.3 per cent of the money raised, compared with merger advisory rates of as much as 1 per cent.
"People have become less interested in risk, and when it comes to the IPO market you're typically talking about smaller companies that people know less about,'' said Alex Vallecillo, a fund manager at Cleveland-based Allegiant Asset Management, which has $28 billion in assets. "The issues hurting the market are not going to change overnight, so to expect a dramatic rebound in sentiment is pretty optimistic.''
The world's biggest financial companies have booked almost $400 billion in writedowns and losses amid the worst US housing slump since the Great Depression.
Consumer confidence across Europe and Japan has tumbled to its lowest since 2003 and reached a 16-year nadir in US. At least 166 companies have withdrawn or postponed their initial offerings this year, more than double the number in the first half of 2007.
About 1/3rd of those were US companies, including Forum Oilfield Technologies, a maker of oil drilling equipment based in Houston, and Liberty Lane Acquisition Corp, the first so-called blank check company underwritten by Goldman Sachs Group.
