Russian Invasion Prompts Companies to Rethink IPOs
Businesses with planned initial public offerings (IPOs) are hitting the pause button to rethink their strategy in light of Russia’s attack on Ukraine, the Wall Street Journal (WSJ) reported on Friday (March 4).
American firms pulled $1.17 billion in equity capital markets transactions during the month of February, compared to $350 million in deals scrapped by the same time the year prior, according to Dealogic data. In Europe, businesses withdrew $634.31 million in equity capital markets deals during the month of February, up from $140.4 million in February 2021, according to Dealogic.
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“Looking at what’s getting done, my market is relatively closed,” Josh Weismer, who heads the equity-capital-markets business at Mizuho Americas, told the WSJ. “Ultimately, volatility is what rules the day.”
Weismer added that people could easily walk away or postpone because of the “geopolitical situation.”
Tero Salminen, CEO of the Finnish cloud firm Efima Oy, told the WSJ that the company started marketing its IPO when the Ukraine crisis was first starting to get going. The listing plans for Efima Oy — planned for Nasdaq First North Growth Market, a division of Nasdaq Nordic — were dropped.
Salminen said the company is weighing alternative funding avenues but hasn’t totally ruled out an IPO, depending on market conditions.
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OpenExchange Inc. handles virtual IPOS for big investment banks, and CEO Mark Loehr told WSJ that he has seen a critical drop in early-stage roadshows — and deal numbers keep declining.
“We were working on 75 deals in February. This month, it is down to five,” Loehr told WSJ. “This is telling you that people are not even testing the waters.”
The situation in Ukraine is being intensely watched by executives and bankers trying to determine when it might be OK to resume transactions. Weismer told the WSJ that for IPOs to come back, the VIX (Cboe Volatility Index) would have to drop to the mid-teens.