IPOs crash and burn
2018 should have been the year of IPOs. Now Boyner and DeFacto are out. What happened?
On the evening of April 4, two consecutive announcements pushed equity capital markets (ECM) into turmoil. Beymen and, a few hours later, DeFacto, on April 5 submitted short notices to the public disclosure platform saying that they have cancelled their initial public offerings (IPO), citing low demand. The two companies saw almost no demand from individual investors, bankers said.
The snap elections are rumoured to have sparked a fire that later turned into a blaze for the markets. The window of opportunity seems to be closed for an indefinite future.
However, companies also deserve some blame for miscalculating the multiples and ignoring both forex volatility and the downward trend in Borsa Istanbul. The weather changed drastically in almost a week and the U.S. dollar gained 5 percent against the Turkish lira, which no one had projected. The first victims were two companies that were vying for listing in Borsa Istanbul.
Just a few days ago, EBRD said it would buy a 20 percent stake in DeFacto, which was expected to motivate other institutional and individual investors. However, individual investors in Turkey feared upcoming elections and preferred to keep their USD reserves rather that investing in new stock offerings.
The same day, a few hours before the cancellation decisions, the Capital Markets Board (SPK) approved two more IPOs, paving the way for Gozde Girisim, the listed Turkish investment company, to offload some of its stake in Penta and Sok Marketler. The unfortunate destiny of Beymen and DeFacto is expected to cast a shadow on every other IPO this year.
Indeed, May was expected to experience the largest wave of IPOs in a decade, with Sok Marketler, DeFacto, Beymen, UN Ro-Ro and Penta listed as potential offerings on Borsa Istanbul. Those companies were expected to raise $2 billion in their primary offerings. Only Sok Marketler had plans to raise $650700 million, which seems to be a difficult target for any company this year, investment bankers say.
Co-owned by Actera Group and Esas Holding, UN Ro-Ro scrapped its IPO plan and decided to sell the company to DFDS for 950 million euros, which was the largest M&A deal of the year so far.
May was not the end the IPO list. The pending Aselsan’s secondary public offering, which aimed to raise around $1.5 billion, is also rumoured to be in trouble after global investment banks shied away from taking part, citing compliance issues. A local consortium of banks will be trying to organize the process without global support. The expected IPO of Borsa Istanbul in the last quarter of the year could also be another victim, many bankers say. No one knows when the next window of opportunity will open and whether we will see any other IPOs this year.