There were no cross-border initial public offerings (IPOs) on African stock exchanges in the first half of 2021 (H1 2021) according to Baker McKenzie’s new analysis, _H1 IPO Snapshot: Unfolding Trends for 2021. However, global demand continued for special use IPOs of acquisition companies (SPACs) hit African shores in the first half of 2021 – with a cross-border listing from a South African issuer of SPAC – African Gold Acquisition Corporation – on the Stock Exchange of New York. Globally, however, Baker McKenzie’s analysis shows that global demand for PSPC agreements continues, as well as
as the current high liquidity and investor enthusiasm have driven capital raising to new heights in the first half of 2021, with most companies preferring to list their IPOs locally. Globally, a total of 1,263 deals valued at $ 294 billion are expected to close by June 30, 2021, with domestic IPOs accounting for 77% of all listings during this period.
Commenting on the lack of cross-border IPOs as a form of capital raising in Africa, Wildu du Plessis, Africa Manager at Baker McKenzie, explained: “Issuers and investors in Africa expect economic and legal security and implementation of effective regulation, combined with the need for greater liquidity, prior to raising capital on the continent. It should also be noted that the region tends to be a few cycles behind the global model, so we could see a similar increase in demand for African IPOs in the coming years, perhaps. be stimulated by the launch of the African Continental Free Trade Area earlier this year. “
Regarding the listing of PSPCs by African Gold Acquisition Corporation, Du Plessis explained that PSPCs are formed to raise capital through IPOs, with the capital raised then being used to acquire existing companies (or invest in companies. existing) whose identity is neither disclosed nor even known. at the time of the IPO. Even if certain indications are given at the time of the IPO as to which industries will be targeted, investors in these SAVS are essentially invited to invest in a somewhat uncertain future. The African Gold Acquisition Corporation noted that it could potentially target any industry, but that it will primarily focus on target companies operating in the gold mining industry. African investors and issuers with interests in the mining sector in Africa will be following this SPAC closely, with the possibility that it could trigger a growing trend for this type of downward raising of capital in Africa.
Du Plessis explained that while cross-border IPOs are not currently being used as a means to raise capital on the continent, the next few years could potentially see an increase in capital raising activity for companies in sectors particularly affected by COVID. -19, in particular the hotel industry and transport. . The tech sector is also expected to integrate with life sciences, which could lead to a trend towards raising capital through IPOs for tech companies with operations in Africa. New and innovative technologies (especially among biotechnologies, financial technologies, electronic technologies, software AI and health technologies) continue to emerge at an unprecedented rate, accelerated by COVID-19 and the need for ‘digitally innovating business operations to survive in a virtual environment could stimulate regional capital to increase operations.
“Plus, no matter where in the world companies are located or what industry they operate in, environment, society and governance (ESG) has become one of the hottest topics for companies, their advice administration, their customers and their employees. While in previous years some viewed the inclusion of ESG elements at the expense of returns and efficiency, among others, ESG strategy is now rightly seen as a prerequisite for the success of the company. ESG is quickly becoming an essential element for successful transactions in Africa, ”said Du Plessis.
Baker McKenzie’s analysis notes that globally, this year’s capital raising has reached a new high, a peak of 220% from the first half of 2020. This is the first time that more than $ 200 billion dollars were raised in the first half of any year, and trading volume also saw a sharp 143% increase in the first half of 2021.
Issuers based in the United States and China led the pack in the first half of 2021, with 424 registrations and 211 registrations respectively, followed by Canada (63), Australia (60) and Japan (53).
Cross-border business has also grown globally, with transaction volume increasing 91% year-over-year and value increasing 232% over the same period. The strong recovery in mainland China’s economy has boosted cross-border listings to Hong Kong and the United States.
“The first half of the year was dominated by unprecedented PSPC activity, a trend that continues to take hold in markets around the world,” said Helen Bradley, Global President of Capital Markets at London-based Baker McKenzie. “And although the appetite for PSPCs has started to wane in the United States, all signs point to PSPCs here to stay and are likely to be permitted in other jurisdictions as well.”
The Nasdaq and NYSE were the main trading destinations in the first half of 2021, raising more than $ 160 billion through 519 IPOs. Over 80% of IPO issuers were based in the United States.
The continued growth of national listings in mainland China supported the performance of the Shenzhen and Shanghai stock exchanges. Other successful companies include ASX, TSX (motherboard, TSXV and NEX Board), Japan Exchange Group, KRX and HKEx (motherboard and GEM).
Euronext Amsterdam was boosted by two cross-border mega-deals, worth over $ 1 billion each, bringing capital raising for Euronext to over $ 4 billion for the first time since 2018.
Main sectors of activity
The financial sector leads in terms of value (USD 124 billion raised) and volume (455 transactions), particularly due to the number of IPOs of SPAC, with more than 350 SPAC going public to raise USD 103 billion. Technology and health came second and third in both value and volume rankings, with the COVID-19 pandemic helping to boost investment in these sectors, particularly in China.
In addition to the increase in the number of SPACs in the United States, other regions may also be moving to attract SPAC activity. In London, Lord Hill’s review of the UK listing regime was published with the aim of helping the LSE gain a competitive advantage over other exchanges after Brexit. One recommendation is to remove the automatic suspension of after-sales service. Euronext, Hong Kong and Singapore are also exploring PSPCs due to investor demand.
In the United States, headwinds are forming for the SAVS. The landscape of US capital markets is expected to change over the next few months, due to the new US administration and the SEC chairmanship. Various regulatory and disclosure changes are considered likely, including increased attention to ESG reporting requirements (including DEI disclosures), closer scrutiny of PSPCs, and more SEC enforcement proceedings.