Asian IPO Activity now Rivaling That In The US

Since the collapse of the dot-com bubble and the adoption of the Sarbanes-Oxley reform of 2002, financial market experts have worried the United States would lose its IPO leadership.

Without public market investors willing to speculate on startups with new technologies, the fear has been that entrepreneurs would take their companies abroad, or simply abandon ideas judged too risky or unsaleable.

There is no debate that the appetite for IPOs on Nasdaq (and the New York Stock Exchange) is at a low and has been for the better part of a decade. Venture capitalists have adjusted by selling companies privately. But their M&A deals have brought lower returns, and the incentives for big entrepreneurial bets are less than they were in the roaring 1990s.

For a while, expectations grew that secondary exchanges in Europe (particular in London) would fill the shoes of the diminished Nasdaq. Now the expectations (with good cause) are that the soaring economies of Asia might step in.

In this era of economic dislocation (brought on ironically by uncontrolled excesses on Wall Street) there are early signs this might be taking place. The Asian IPO market is feeling strains of its own. There have been several quarters of declining volumes and a suspension of IPOs by the Chinese government in September. But the malaise is ready to reverse.

In the second quarter, for instance, Asian markets saw six IPOs, matching the total of venture-backed IPOs in the U.S., according to Thomson Reuters. Total offering size was $1.9 billion, or just shy of the $2.3 billion in the states, Thomson Reuters reported.

At the same time, there are 32 Chinese companies lined up to sell initial offerings to the public in coming months. Only 10 venture-back companies sit in registration in the U.S.

Times of stress often produce long-lasting market changes. It is possible IPO leadership could be one of them, with devastating consequences for the world’s largest economy.