The fiasco of Facebook listing and debt crisis in Europe have caused in May the worst development of initial public offerings (IPO) since the collapse of Lehman Brothers, according to Bloomberg. The index calculated by Bloomberg for initial public offerings, which measures changes in American shares in the first year after listing was 15% in May, and Facebook titles have recorded the worst performance among the 30 largest such operations on the U.S. stock market since 2011.
Index decline is similar to that recorded in October 2008, when Lehman Brothers triggered the worst financial crisis since the Great Depression. Kayak Software and VKontakte, a social network operator in Russia, withdrew their initial offerings this week, while Graff Diamonds postponed its listing in Hong Kong, and Formula 1 racing organizer announced that its listing on Singapore stock market could take place later this year and not in the second quarter, as planned. The 22% drop of Facebook shares scared investors, already affected by the deterioration in the capital markets and recession in Europe, said Jeffrey Sica, analyst at Sica Wealth Management.
“We have reached a time when distrust and attention are so great that companies do not want to list on the stock market and investors are not prepared to pay attention to them. This is long term damage to businesses and investors’ confidence,” said Sica.
Facebook had on May 17 the largest initial public offering ever deployed in the IT industry, which attracted $16 billion, and the company was listed with a market capitalization of $104.2 billion. Facebook shares fell 22% from May 18, closed Thursday on the Nasdaq market at $29.60, up 5% compared to Wednesday and dropped under $28 to close at $27.72 on Friday. After Facebook’s listing, at least other 13 initial public offerings have been withdrawn or postponed. Since early April, there were 192 listings worldwide, so that the current quarter could be the worst after September 2009, when there were only 177 IPOs.
VIX index which is a measure of U.S. shares volatility rose 25.1 points on 18 May, its highest level this year, and Stanley Nabi, an analyst at Silvercrest Asset Management Group, believes that investors will be interested in other IPOs only after markets’ stabilization.
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