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Want to invest in IPOs? Research is key

TradingPub Admin | December 30, 2012

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If you are interested in trading stocks, you might benefit from learning more about initial public offerings (IPOs) and the activity they have enjoyed both in 2012 and in recent years.

Swollen Backlog 
2012 was a tough year for these flotations as market participants were held up by a variety of economic headwinds including concerns about the fiscal cliff, according to Bloomberg. Data provided by New York-based market research firm Ipreo reveals that this global backlog surged to $115 billion at the end of this year.

Credit Suisse Group AG and Barclays Plc. told the news source that if U.S. lawmakers resolve the budget disagreements so that the nation does not go over the cliff, the renewed confidence could combine with the existing backlog of companies looking to go public to create a surge of offerings next year, the media outlet reports.

Many companies are of the opinion that the financial results they have been creating in this environment are not representative of their true potential, Darrell Uden, co-head of equity capital markets for Europe, the Middle East and Africa at Zurich-based UBS AG, told the news source during a phone interview. A substantial fraction of these firms are putting off their IPO until they can generate a few more quarters of financial results.

Lackluster 2012 Activity 
According to data compiled by the media outlet, IPOs worldwide resulted in companies raising $112 billion in 2012, which was the least since 2008. This weak performance happened amid widespread economic uncertainty, and as specific jurisdictions encountered severe hardship. 

Flotations happening on U.S. bourses held up well in 2012, as the New York Stock Exchange and the Nasdaq raised $47.1 billion this year through Friday, December 13, The Wall Street Journal reports. This was the highest annual amount raised by these exchanges since 2007, but the number of offerings was virtually unchanged from 2011.

Europe 
With fiscal challenges being faced by the region's nations and lending institutions, the number of primary offerings in Europe plummeted dramatically during the year, falling to $9.91 billion, one-third the amount conducted in 2011, Bloomberg reports.

The economy of the euro zone stagnated, as government officials announced earlier in the year that the region's gross domestic product had declined 0.1 percent during the third quarter after falling 0.2 percent in the second, The Guardian reports.

After this data was released, European Central Bank President Mario Draghi stated that policymakers are working with a limited timeframe to right the economic situation in the 17-nation euro zone, according to the news source.

Rapid Improvement 
There are some bright points in the European economy, as the number of IPO held in the region during the fourth quarter of 2012 surged to $5.71 billion, which was a more-than five-fold spike from the same period last year, Bloomberg reports.

However, this sharp increase comes as data compiled by the media outlet indicates the amount of money generated by primary offerings in Europe since 2007 is not even half of what it was before the region suffered a fiscal crisis.

2013 Opportunities
2013 could enjoy some high-profile European IPOs, as communications firm Telefonica SA, whose German unit Telefonica Deutschland Holding AG generated 1.45 billion euros ($1.9 billion) in the largest primary offering of 2012, makes an effort to raise up to 6 billion euros by listing its Latin American assets, according to the news source.

There may be some appealing opportunities in 2013, but it is crucial that you perform your due diligence on these transactions. If you want to access quality stock trading education, you can find it through TradingPub, home to some of the top investors and traders in the industry.