On Wednesday, Reuters reported that for the first half of 2010, Morgan Stanley (MS) has attained the top position in global Initial Public Offering (IPO) deals. The company was able to secure the premier position due to some large deals in the IPO market.
According to Reuters, Morgan Stanley has written 36 deals with estimated proceeds of $5.9 billion in the first half of 2010, eight times higher than what it clinched in the first half of 2009. The company was third in terms of IPO deals for the same period in 2009.
Morgan Stanley reached this height based on its global reach. Asia accounted for six of the ten largest IPO deals. South Korea’s Samsung Life Insurance Co Ltd and Japan’s Dai-ichi Life Insurance Co. were the top IPOs raising $4.41 billion and $11.16 billion, respectively. Morgan Stanley was the joint bookrunner for the Samsung Life.
In the first half of 2010, China First Heavy Industries, which raised $1.7 billion and Huatai Securities generating $2.3 billion, were a couple of the noteworthy deals. In addition, the IPO of Agricultural Bank of China is expected to raise approximately $24.5 billion. Morgan Stanley is one of the underwriters for Agricultural Bank of China’s H-share offering in Hong Kong.
Europe accounted for the other four biggest global IPOs in the first half of 2010. European IPOs fetched a total of $18.58 billion in 88 deals during the same period. Morgan Stanley was an underwriter for Poland’s insurance group PZU SA, the biggest European IPO so far this year, raising $2.71 billion and Amadeus IT Holding SA, Spain’s travel reservations company, which raised $1.74 billion.
In South America, Morgan Stanley aided OSX Brasil SA, a Brazilian shipbuilding and oil services company, in raising $1.58 billion from its IPO.
Globally, in the first six months of 2010, IPOs obtained $93.56 billion through 569 deals and earnings from the IPOs have leaped more than seven times from the year-ago period.
The former top-ranked JPMorgan Chase & Co. (JPM) was placed in the second position with 40 deals generating $5.65 billion, and Goldman Sachs Group Inc. (GS) lost one place and came to the third spot with 31 deals valued at $5.1 billion.
Uncertainties regarding the European debt crisis could increase market instability and weigh on new issues. This could have a cascading effect on the retail investors who may shy away from small, less liquid IPOs. During the first half of 2010, several IPOs were put off as a result of these apprehensions.
One major Asian company that is expected to revive its $10 billion IPO plan is American International Group Inc.’s (AIG) Asian insurer, AIA. As per a Wall Street Journal report last month, JPMorgan and Morgan Stanley are the main underwriters for General Motors’ IPO that is expected to raise about $10 billion to $20 billion.
Morgan Stanley is currently rated as Zacks #3 Rank (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. The company is facing major headwinds to maintain its competitive edge and regain its industry leading position, considering that its growth has been negatively impacted by the after-effects of the financial crisis.
However, we believe that the company has the potential to realize the full benefits of its strategic and cost-cutting initiatives, employing new talent and exploring inorganic growth initiatives. Therefore, we retain our Neutral recommendation.
Read the full analyst report on “MS”
Read the full analyst report on “JPM”
Read the full analyst report on “GS”
Read the full analyst report on “AIG”
Read the full analyst report on “GM”
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