IPO gave way to M&A in 2015, a year of European financial turmoil – A detailed look back at the last year, and what is ahead
2015 is just two weeks away from drawing to a close, and the entire business community can look back on a year which began with the Swiss National Bank’s removal of the 1.20 peg on the EURCHF pair that started the year off with unprecedented volatility resulting in many casualties among electronic trading companies. The […]
2015 is just two weeks away from drawing to a close, and the entire business community can look back on a year which began with the Swiss National Bank’s removal of the 1.20 peg on the EURCHF pair that started the year off with unprecedented volatility resulting in many casualties among electronic trading companies.
The negative client balances that blighted many firms that weathered the storm were a bugbear for a long time subsequent, and set the scene for a year of fiscal and political events that have caused many firms to shelve any plans to publicly list their stock.
2013 was the year of the IPO. Every company in this industry was talking about it, especially firms which had been established in the preceding 5 years and were on the up such as Teddy Sagi’s SafeCharge International Group Ltd (LON:SCH) which listed eventually made its way onto London Stock Exchange’s Alternative Investment Market (AIM) at the beginning of 2014 and now has a market capitalization of £372.8 million, shortly to be joined on the same exchange by Plus500 Ltd (LON:PLUS) which became recognized as a lesson in corporate efficiency, rising up to a value of over $1 billion by May 2015.
London’s AIM has been the preferred choice of FX brokerages and FX related fintech companies that have morphed from startup to their status as firms with attractive stock to a public audience, however, this year, with the European Union’s economy having teetered on the bring as bailout after bailout did not resolve Greece’s unsustainable habit for borrowing rather than producing, defaults, elections with unfavorable outcomes and nwo a U-turn by the British government with regard to fiscal and welfare reforms, IPOs are not on the agenda.
Across the pond, the Federal Reserve’s rate hike has also been an obstacle to cross-border IPOs.
A report by Baker & McKenzie which monitors such activity, the Cross-Border IPO Index, has stated that all of these factors contributed to a 39% drop in the number of cross-border IPOs this year.
When a company lists abroad, it is a very good measure of the liquidity of the IPO market in general, however the value of the IPO market contracted 56% from last year, equating to $35.5 billion overall, from just 116 deals.
Last year, there as a 26% year on year increase in cross border IPOs, exemplified by some of the aforementioned AIM deals, and in 2013, there was a 58% rise.
As British financial institutions continue to look toward the Far East and will likely continue to do so next year, it could be that startups and supporting fintech firms in London may follow suit, as the large scale electronic financial services sector becomes increasingly Hong Kong, Singapore and China-centric which is the region of the go-getters and business-savvy entrepreneurs as opposed to the debt-ridden, olde worlde socialists and defaulting siesta countries with low-tech infrastructure.
In 2015, mergers and acquisitions were a greater part of the commercial agenda for many companies, a trend which began in mid 2014 within the FX industry, with FXCM Inc (NYSE:FXCM having acquired FXDD’s retail client base in the United States, and also IBFX’s MetaTrader 4 client base as Monex Group’s North American subsidiary began to concentrate its efforts on its proprietary platform TradeStation.
That particular deal, which was completed in early January last year, represented a very effective means of growing further economies of scale, with FXCM having paid $5.4 million for IBFX’s retail MT4 client base and assets; marking out M&A activity preferable than organic growth in a crowded market as far as client acquisition is concerned.
In December last year, the Wall Street Journal generated speculation that IronFX was looking toward a confidential IPO in the US, which did not materialize, however it is debatable as to the reasons why the firm did not go down that route. There was also substantial clamour that this was indeed simply a rumor and had no basis, therefore red herrings are always apparent in any dynamic of this nature.
As 2015 gives way to 2016, it is clear that the IPO plans by many firms wishing to do battle with the giants on the world’s stock exchanges will remain on hold, however, FinanceFeeds predicts that 2016 will be the year of fintech development and collaborative operation among the firms at the top level of our industry, which instead of going public, will hold their own by developing new technology solutions which will empower developers and traders alike in order to expand their business via global, collective R&D and open source interfaces.