Pause for politics

Why global financing activity should cool off in 2H18

The near record-setting pace of 1H18 capital markets activity isn’t likely to be replicated this half, but that won’t be because of changes to sector fundamentals. Instead, it’s likely the consequence of macroeconomic and geopolitical market uncertainty coupled with a calendar that leaves fewer available days to execute deals.

The confidentially filed IPO queue remains full of high-quality candidates that bankers said should have no problem getting out. And there isn’t any lack of capital. Despite missing buyside expectations, M&A activity in 1H18 recycled more than $50 billion into the space and has provided investors with plenty of dry powder.

But finding hospitable market conditions coinciding with windows where investors aren’t all on vacation will be a challenge. Volatility stemming from the Nov. 6 U.S. midterm elections will add to an increasingly chaotic macroeconomic and geopolitical climate.

The fourth quarter thus promises to be the slowest of the year, following what’s already expected to be a quiet summer season after a burst of IPO financings in June (see “Bountiful, Not Bubbly”).

NASDAQ deal flow will largely be restricted to a tight window between Labor Day and Halloween, with bankers conservatively forecasting 10-20 new biotech listings in the back half of the year. By contrast, 1H18 saw 30 biotech flotations on NASDAQ.

Six companies are in the queue for IPOs on Hong Kong Exchanges and Clearing Ltd.’s (HKEX) new biotech chapter, and nearly a dozen pre-revenue or pre-profit biotechs with a Chinese interest are expected to list on the chapter during its first year (see “Hong Kong’s New Chapter”).

But macroeconomic concerns may get the chapter off to a sluggish start.

Global follow-on demand is expected to remain strong next half but could see a slowdown given the dearth of value-inflecting clinical catalysts coupled with the regular dampening caused by the holiday season. Achieving milestones remains a prerequisite, as purely opportunistic financings see limited interest or require hefty discounts (see “Eyes on Launches”).

Plethora of elites

Global biotech IPO financings in 1H18 reached an all-time

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