Brief analysis by Monika Rosen, Chief Analyst at Bank Austria Private Banking:
IPOs coming back – one year after the Facebook flop

  • Stock issues relevant again on the first anniversary of the Facebook IPO
  • IPO's to gain momentum in China
  • Bank Austria Private Banking investment strategy still overweighting equities, including emerging markets

The world exchanges are currently proving all the sceptics wrong, and many major indices are even breaking new records almost every day. The Dow Jones, S&P 500 and the German DAX were all able to reach new highs. This has also breathed new life into the market for stock issues. The less than successful IPO of Facebook almost exactly one year ago pulled sentiment down for a long time. The frequently erratic development of many indices last year also gave many issuers pause. This year, however, the exchanges are climbing rapidly and the door is wide open for new issues.

The long shadow of Facebook – whose stock is still trading well below the issue price – could also fall on one of the most interesting candidates for an IPO this year, namely the Alibaba Group. This Chinese company was established in 1999 and successfully operates a number of trading platforms as well as an online payment model. This makes Alibaba a combination of ebay, Amazon and paypal. The company is profiting from the steadily rising purchasing power in the Middle Kingdom. With revenue of around USD 1.84 billion, Alibaba generated a profit of USD 642 million in the fourth quarter of 2012; both of these figures also increased substantially in year-on-year comparison.

Alibaba already attempted a stock issue in 2007 with the business customer platform Alibaba.com – but was not successful and delisted the company in 2012. There are rumours that the company, in which US Internet giant Yahoo holds 24 per cent, wants to avoid the "Facebook trap" at all costs. In other words, the company does not want to push the issue price too far. And there is not yet any concrete information about when and on what exchange Alibaba could go public. Many observers think that the IPO could take place in Hong Kong in the second half of 2013, as the exchange in Shanghai has currently suspended new issues.

Summary: The Facebook flop has largely been digested as of the one-year anniversary of the IPO – except in the price of the company's share, which is still well below the issue price. The exchanges are rising and volatility has fallen significantly – so conditions are ideal for an increase in new issues. If it stages a successful IPO, Alibaba would definitely have the potential to be a highlight in the current stock trading year thanks to its combination of "China" and "the Internet". We remain confident about equities in our investment strategy, including for emerging markets stocks, but are also aware of the fact that periods of strong gains are often followed by at least a phase of consolidation.

Enquiries: Monika Rosen
Chief Analyst at Bank Austria Private Banking
Tel. +43 (0) 50505 - 40104
E-mail: monika.rosen@unicreditgroup.at