• Strong global liquidity Loose monetary policy in a number of major markets, including the USA and the UK, has driven interest rates down and sent investors searching for juicier returns than those available on ‘safe’ assets such as government bonds. This has made more money available to companies looking to list. The presence of such liquidity is a crucial underpinning factor in the optimism felt by many at the start of 2014.
• European recovery The recovery in Europe, after what some of you may have heard has been a difficult couple of years, appears to be under way with Ireland becoming the first PIGS (Portugal, Ireland, Greece, Spain) country to exit its bailout programme. A number of countries are forecasting reasonable growth in the next year. This has brought a surge of money to European markets, in particular from the other side of the Atlantic, as US investors look to rebuild their European portfolios.
• High-profile tech IPOs The resurgence in IPOs has been supported by a broad range of sectors. However, the IPOs of tech companies look set to lead the way with some high-profile companies including Dropbox and Spotify reportedly looking to list in 2014 and likely, along with others, to attract substantial valuations.
• Private equity listings The final quarter of 2013 saw a burst of activity from private equity (PE) firms choosing to exit their investments, many made as far back as 2008, via an IPO. PE firms, encouraged by healthy valuations and strong post-listing performance in recent times, have looked to exit their investments following a five-year period where it has proved difficult to find the right conditions to float. One especially notable proposed IPO this year is the sale of TSB following its 2008 investment from UK Plc.
• Fiscal policy tightening Central banks giveth and central banks taketh away loose monetary policy. Following uncertainty over interest rate levels, both the Fed and the Bank of England sought to reassure investors with ‘forward guidance’, but it has not gone unnoticed that the guidance contained some flexibility for central banks. Tightening of monetary policy, such as the Fed’s decision to trim monthly bond purchases from $85bn to $75bn, potentially leading to an interest rate rise, could see investors retreat from IPO deals, forcing companies to put their IPOs, and the champagne, on ice.
• Tech bubble The high valuations on a number of tech companies have led some experts to warn of a bubble with key indicators of some high-profile firms alarmingly similar to dotcom companies which subsequently went pop. Analysts point out that some of today’s tech companies are significantly different to some of their predecessors, not least because they are generating revenues. However, some are not and these are the companies giving analysts most cause for concern. A few unsuccessful listings could have wide-ranging consequences not only for other tech firms looking to list, but also for the wider IPO environment.
Public Offering Securities Insurance (POSI) and Markel
With a busy year of IPOs predicted in 2014, it is a time of potentially significant exposure for directors and officers of companies making the decision to ‘go public’. Markel is able to write POSI policies for a broad range of industries and in a wide variety of territories, including foreign issuers listing in the USA. We are able to write policies on a primary or excess basis.
For more information, contact Graham Preston on: +44 (0)20 7953 6739