overall capital raising decreases due to dip in domestic listings; pipeline may boost region's performance through rest of the year.

Capital raised by African issuers declined by 28% year on year to USD 341 million in the first half of 2019 (H1 2019), compared with USD 472 million in H1 2018. The decline is attributed to the 80% drop in domestic capital raising in Africa - standing at only USD 85 million from four IPOs, compared with USD 419 million from the same number of IPOs in H1 2018 . This is according to Baker McKenzie’s latest Cross-Border IPO Index for H1 2019, using data sourced from Refinitiv.

According to the Index, the largest IPO to come out of the region so far in 2019 is Carbon Holdings Ltd, which is expected to raise as much as USD 250 million in London and Egypt sometime in June. Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011. Growing confidence in economic policies introduced since the currency float has boosted the EGX and is prompting companies to consider share sales. One large pipeline IPO is expected from Banque du Caire SAE in Q3 2019.

Wildu du Plessis, Head of Capital Markets at Baker McKenzie in Johannesburg says:

“The drop in African IPO values in H12019 was mostly because of political and economic uncertainty on the continent. Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead. Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example,  the so-called United States (US) China trade wars and the possibility of a  “no deal Brexit” – both have the potential to impact African economies significantly.

“In South Africa, capital raising has decreased substantially in recent years, also due to economic and political uncertainty. Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy. The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Du Plessis says.

“However, there is good news in other jurisdictions in Africa. In addition to the healthy pipeline of IPOs in Egypt, there are also signs of life returning to Nigeria’s capital markets. Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering and, according to Baker McKenzie’s recent Global Transactions Forecast, there is a predicted return of IPOs in Nigeria in the next three years.

“A case in point,  Airtel Africa  announced recently that it is seeking to raise as much as USD 750 million in London and Nigeria, but the company has yet to release more information about when it plans to go public this year.

“Hopefully this is the start of a long upswing in capital raising activity in the country,” says Du Plessis.

The top cross-border IPOs by African issuers were South African company Renergen Limited’s listing in Australia, which raised USD 7 million; and Egyptian company Carbon Holding’s pipeline dual listing in London and Egypt, which is expected to raise USD 250 million. Both of these cross-border IPOs are in the energy and power sector. In terms of domestic IPOs, technology company BMIT Technologies PLC raised USD 55 million when it listed in Malta, real estate company ICON Properties PLC’s listing in Malawi raised USD 20 million, industrial company Skyway Aviation Handling Co raised USD 6 million when it listed in Nigeria and healthcare company Speed Medical SAE raised USD 3 million in a domestic IPO in Egypt.

A major deal that is excluded from African figures is Jumia Technologies' debut on the NYSE, which raised USD 225 million in April. Jumia is a pan-African e-commerce start-up but its parent company, Jumia Group, is incorporated in Germany, so it is not included in the Africa report.

GLOBAL OUTLOOK

Capital raising in global IPO markets fell by 37%, with volume dipping 34% in the first half of the year compared to the same period in 2018. A total of USD 69.8 billion was raised across 514 IPOs, which is the lowest for value and volume since 2016. The US Federal government shutdown, continuing trade tensions between the US and Beijing, the ongoing Brexit saga and the decline of mega IPOs all contributed to a slower market performance. With fewer IPOs in the market, competition amongst exchanges is growing, as some listing locations make strategic changes to entice public offerings. The introduction of China's Science and Technology Innovation Board looks set to shake up the market and challenge New York and Hong Kong for tech listings.

Koen Vanhaerents, Baker McKenzie’s Head of Global Capital Markets, says:

"The global IPO market experienced quite a slow start to the year as significant political issues stifled activity, along with a change in investor sentiment towards risk – particularly among pre-revenue companies. While global activity experienced sharp declines, this is perhaps skewed slightly when compared to the stellar performance seen in the same period in 2018. With a strong pipeline, H2 2019 looks set to deliver a much more prosperous performance overall."

EMEA OUTLOOK

The EMEA IPO market struggled during the first six months of 2019 due to uncertainties surrounding the UK’s exit from the European Union. Overall capital raised fell by 67% compared to the same period in 2018 to USD 9.2 billion while the number of IPOs fell by 61% to 47. Cross-border activity was even more profoundly impacted with only three listings in EMEA and only one of those on the London Stock Exchange. Domestic activity levels helped the London Stock Exchange to retain the top spot for overall capital raising at USD 2.7 billion from 12 listings. Seven of these listings were from the financials sector and raised almost USD 2 billion, the largest of which was Network International's USD 1.4 billion IPO.

Second to London was Borsa Italiana with USD 2.3 billion from seven listings, boosted by the USD 2.2 billion Nexi SpA listing.SIX Swiss exchange pulled in USD 1.9 billion from two IPOs, with Stadler Rail's debut accounting for USD 1.3 billion of that.

Despite its sluggish performance, EMEA is proving to be the region of choice for FinTech listings, particularly in the payments field, as the age of digitization and cashless transactions continues to explode, fueling the need for innovation and technological growth. FinTech listings accounted for more than a third of capital raised and the largest listing was Nexi SpA's IPO.

Adam Farlow, Baker McKenzie's Head of EMEA Capital Markets, says:

"Europe’s market and economy continues to struggle under the weight of political volatility and a lack of clarity around Brexit, but all eyes look to October for more transparency and direction. We are hopeful that the market will subsequently settle and activity in London will recover. The demand is still there for access to the liquidity and exposure that comes with the London Stock Exchange."