On May 17, about an hour after Facebook Inc. (FB) completed its record $16 billion initial public offering, CKE Inc. (CK:US) announced plans for a more modest IPO. The owner of the Hardee’s and Carl’s Jr. fast-food chains sought as much as $213 million.
Less than three months later, Chief Executive Officer Andrew Puzder shelved the deal for CKE. Although investors started 2012 with optimism that equity issuance would come roaring back following a lackluster 2011, they ended the year facing a cascade of bad news: Facebook’s stock plunged 30 percent, Europe’s economic woes re-emerged and the U.S. fiscal cliff standoff remained unresolved, Bloomberg Markets magazine will report in its April issue.
More from the April 2013 issue of Bloomberg Markets:
As of mid-February, Puzder had yet to set a firm date for CKE’s offering, which joins a growing backlog of IPOs on ice. “Everybody is concerned; there’s a lot of trepidation out there,” Puzder says. “You don’t know what to do with your capital.”
Last year, total share sales worldwide rose by 7.4 percent to $478 billion, according to data compiled by Bloomberg. JPMorgan Chase & Co. (JPM:US) and Morgan Stanley (MS:US) tied for first place in the annual Bloomberg Markets ranking of underwriters, each earning an estimated $1.16 billion in fees. Both banks worked on Facebook’s IPO and the U.S. selldown of American International Group Inc. (AIG) stock. Total IPO fees plunged 32 percent to $4.3 billion in 2012.
Facebook’s offering was almost double the size of the second-biggest IPO of 2012, the Tokyo listing of Japan Airlines Co. in September after it emerged from bankruptcy. People’s Insurance Co. (Group) of China Ltd. raised $3.6 billion in Hong Kong’s biggest listing last year.
This year, the ongoing fiscal battles in Washington may continue to weigh on investor confidence and thwart IPOs, Lear Beyer, head of equity syndicate at Wells Fargo & Co., says.
Investors are banking on an improving global economy. While growth in the U.S. is expected to slow in 2013, Europe will turn from contraction to expansion, Asia will pick up to 6.7 percent and Latin America will also accelerate, according to economists’ projections compiled by Bloomberg.
“Something we haven’t had for some time is all markets participating at the same time,” says Mark Hantho, the New York-based global head of equity capital markets at Deutsche Bank AG. “If we get that combined enthusiasm on global growth, that’s what is going to ultimately boost issuance.”
Wood to Chop
More excitement for stocks may also help IPOs. Investors have pulled money out of equity mutual funds in favor of bonds every year since 2008, with outflows totaling $153 billion in 2012, according to the Washington-based Investment Company Institute.
The trend may be reversing as the Dow Jones Industrial Average (INDU) capped its best January since 1994, returning 5.8 percent. And net flows into equity mutual funds rose in each of the six weeks through Feb. 13, according to ICI.
“People are much more consistently optimistic,” says Mary Ann Deignan, head of Americas equity capital markets at Bank of America Corp. “But there’s still a lot of wood to chop.”
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