As 2008 ends, consider yet another indication that this was a terrible year for financial markets: there has been only one IPO in the US in the last four months according to IPO research firm Renaissance Capital. The U.S. total for 2008 was 43 new issues raising $50 million or more, which makes this the slowest year since 1979 and represents an 84% decline in the number of deals from 2007.
Of the IPOs that did make it to market, performance was not good. 58% percent of new issues in the U.S. traded down on their first day. 84% of global IPOs finished the year below their offer price.
And while it is true the rest of the world’s markets are also hurting (global IPO proceeds fell 69% compared to last year) the data indicates a disturbing trend that non-US markets may be more receptive to IPOs. The largest deal of the year was easily Visa in the U.S. at close to $18 billion, but the next 14 largest deals were on non-U.S. exchanges, including 3 in Saudi Arabia and several in the Asia-Pacific region.
The global IPO decline is directly linked to the absence of cheap credit and investors in general looking for less risky endeavors. The U.S. decline is also likely a result of increased regulation costs and increased competition with emerging markets that can still show significant growth.
The list of 799 “financial companies” that cannot be subject to short sales by order of the SEC is growing. The SEC has authorized major stock exchanges to identify additional companies that should be added to the list, and the NYSE and NASDAQ have added at least 299 and 71 companies, respectively.
To identify companies, the SEC provided the exchanges with 7 criteria; if at least one criteria is met, the company goes on the list. The NYSE has confirmed that a company need only certify to NYSE that it meets the criteria to be put on the list.
NYSE reports that to be on the list a company must be a bank, savings association, registered broker or dealer, or insurance company (as defined at various points in the U.S. Code). However, this has not stopped some surprising companies from being added to the list, including CVS Caremark, General Motors, and IBM, all of which are tangentially related to lending/financing or insurance but are not traditionally thought of as a “financial company.”
Some commentators are criticizing that the goal of the no-sale list is to protect banks because they are particularly susceptible to a crisis of confidence, not to protect any company that might experience a decline in stock value. The SEC has long supported short selling as an important market tool against inflated prices.
Interestingly, two financial firms, JMP Securities and Diamond Hill Investment, asked to be taken off the no-short list because their managers support short selling activities …
The major U.S. securities exchanges and self-regulatory organizations have agreed to consolidate oversight of insider trading in the hands of two regulators: NYSE Regulation and FINRA. The following equity exchanges and FINRA have signed the agreement, which must now be approved by the SEC:
- American Stock Exchange LLC
- Boston Stock Exchange, Inc.
- CBOE Stock Exchange, LLC
- Chicago Stock Exchange, Inc.
- International Securities Exchange, LLC
- NASDAQ Stock Market, LLC
- National Stock Exchange, Inc.
- New York Stock Exchange, LLC
- NYSE Arca Inc.
- Philadelphia Stock Exchange, Inc.
- NYSE Regulation, Inc. (acting under authority delegated to it by NYSE)
Currently, each securities exchange is responsible for investigating insider trading by its market participants, which amounts to 11 separate programs. The consolidation of power into two regulators is expected to make insider trading investigations more efficient by preventing duplicative efforts and failed detection of illegal activity.
The consolidation may result in more convicted insider traders, or it may simply result in more efficient investigation of insider traders who would have been caught anyway. The Wall Street Journal’s MarketWatch reports FINRA has already referred 104 insider trading cases to the SEC in 2008, compared to 118 in all of 2007. NYSE Regulation has referred 90 cases as of the end of June, compared to 141 in all of 2007.