Investor Alert

July 2, 2007, 12:01 a.m. EDT

Exchanges of Europe Lead the World in IPOs

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By Henry E. Teitelbaum

LONDON -- If there were any doubts as to Europe's standing on the scene for initial public offerings before the year began, the first-half numbers laid bare the continent's position as a growing and increasingly attractive home for companies looking to go public. That position, despite some obstacles on the horizon, looks poised to keep expanding.

Companies in emerging markets like Kazakhstan and Russia joined those of more-established countries in Europe in listing on the London Stock Exchange -- an attractive marketplace for companies looking to escape or avoid the regulatory rigors of a U.S. listing -- and other exchanges across the continent.

In fact, the volume of initial public offerings by European issuers on the region's exchanges far outpaced that of any other, with their value rising 45% to $52.5 billion from $36.2 billion over the same period a year ago, according to financial-information provider Dealogic.

That compares with $40.2 billion of IPOs in the Americas, up 13% from $35.6 billion a year ago, or in the Asia-Pacific region, excluding Japan, where first-half growth rose 2.4% to $30 billion from $29.3 billion the previous year.

Going into the second half, the value of IPOs will likely keep growing apace, economists and fund managers say, assuming economies remain healthy, interest rates stay steady and the recent surge in volatility because of rising bond yields settles back down.

To be sure, this is no certainty, given the bumpy end to the first half, which saw markets world-wide seesaw after a period of relative calm. Further, tightening credit markets could deal a serious blow to the buyout boom that has, in part, supported the IPO boom.

Nowhere is the supply of companies ready to come to market more accessible to Western investors than in Russia. According to Dealogic, the number of new stock listings in Russia doubled in the first half of this year to 12 from six a year ago.

Moreover, the value of those deals ballooned to $14.9 billion, compared with only $2.4 billion in the same period in 2006, and pushing the country to third in the world from seventh a year ago, behind the U.S. and China, according to Dealogic.

The emergence of Russia contributed heavily toward the rise in value for IPOs in Europe and helps explain why the region continues to set the pace for new listings world-wide.

Among the stock offerings out of Russia over the past six months was the $8.8 billion debut of OAO Bank VTB, which included a $6.4 billion placement on the London Stock Exchange.

"Europe has benefited from some very large transactions, which has kind of swung the dollar volume in its favor," says Vis Raghavan, London-based head of equity capital markets in Europe, the Middle East, Africa and Asia for J.P. Morgan, a unit of J.P. Morgan Chase & Co.

The majority of IPOs, by value, were listed on the LSE. The value of new issues on the LSE rose 87% in the first half to $33.7 billion from the same period a year ago, Dealogic says.

Analysts say the LSE is the beneficiary of the U.K.'s relatively light regulatory burden, especially in relation to exchanges in the U.S.

Richard Batty , global-investment strategist for Standard Life Investments in London, sees demand for new issues stoked by the still-plentiful tide of cash world-wide looking for a place to park and the risk-taking appetite of investors.

Write to Henry E. Teitelbaum at henry.teitelbaum@dowjones.com

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