Domestic IPOs by African issuers increase for a second year
While 2017 registered fewer domestic listings in Africa, the capital raised in domestic listings by African issuers increased by 19.5% year-on-year to $1.4-billion, the second consecutive year of growth.
The latest research by global law firm Baker McKenzie shows that there were seven domestic initial public offerings (IPOs) in Africa in 2017, compared with 15 in 2016.
With the election of Cyril Ramaphosa as the new president of the ANC, there has been an increase in positive market sentiment, said Baker McKenzie partner and head of Africa Wildu du Plessis.
“There is more interest in capital markets of late than there has been in a few years; however, we will have to see to what extent the Steinhoff developments will put investors off. Time will tell if the fallout from Steinhoff’s woes will impact on Steinhoff Africa Retail and other unrelated large corporates in South Africa,” Du Plessis said.
In 2016, more foreign direct investment flowed to the hub economies, with new East and West Africa clusters emerging.
“This trend also dominated in 2017, and while South Africa has the most attractive exchange for issuances, the new clusters are shaping up to drive the IPO landscape going forward,” he explained.
Globally, IPO volumes in 2017 reached the highest level since 2007, with momentum building throughout the year with an acceleration in both volume and value of capital raised in the second half of the year.
In total, 1 694 companies raised $206.6-billion from IPOs, an increase of about a third in both value and volume on 2016.
Cross-border deals increased by 60% in volume, growing in all regions, including Latin America, which saw its first cross-border listing in ten years.
“The IPO market in 2017 has put in its best performance in ten years," said Baker McKenzie capital markets global head Koen Vanhaerents, who attributed the strong performance to a more stable political environment in some of the key markets, combined with strong economic growth.
"With key risks to the global economic outlook easing, we expect IPOs to hit a new post-financial crisis high in 2018," he added, forecasting that domestic IPO activity would continue to rise to a peak of over $220-billion in 2018.
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