This week we received the disappointing news that the UK economy contracted by 0.2% in the last quarter of 2011, thus delivering us a net growth rate for the year of 0.9%. What’s more, forecasts for 2012 have come down in recent months on the back of the continuing turmoil in the Eurozone.
While the recent actions of the ECB have brought some liquidity back to the markets, the Eurozone is far from being out of the woods. Greece’s ongoing negotiations with its creditors regarding the extent of the haircut they might receive, increased speculation surrounding a potential Portuguese default, and the recent decision by the credit rating agency Standard & Poor’s to strip France of its triple A credit rating have all served to increase uncertainty in the Eurozone.
In light of this, it makes the sight of equity markets being so far up in 2012 all the more suspect. However, it remains too early to tell whether their recent gains are laid upon firm foundations or are simply market hype.
On the IPO front, the first Main Market IPO of the year has just taken off, with Ruspetro, the Russian oil & gas explorer, successfully raising $250m, albeit at the bottom of its price range. However, the nature of Ruspetro’s launch was interesting - the company took the decision to launch via a one day book build after a period of test marketing, rather than the more traditional two week road show, which experience last year demonstrated can torpedo a float if the market dives during the two weeks. So, in my opinion, we should take our hats off to Ruspetro’s underwriters, Merrill Lynch, Rencap and Mirabaud for their novel and inventive approach to the float during these times of economic uncertainty. However, it remains to be seen whether other companies will adopt this approach.
Nevertheless, let’s hope other companies will be tempted back to the IPO market before too long.
