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IPOs in 2012 May Struggle With Lower Market Valuations, UBS Says

Jan. 23 (Bloomberg) -- Initial public offerings in 2012 may not generate much more cash than last year as lower-than-average valuation levels in the broader stock market discourage companies from going public, according to Zurich-based UBS AG.

The average price-to-earnings ratio for the Standard & Poor’s 500 Index this year is below the historical average, meaning that companies aren’t likely to fetch attractive prices in IPOs, said James Palmer, New York-based managing director of equity capital markets at UBS.

S&P companies have an average price-to-earnings ratio of about 13.7 so far this year, compared with an average of 15 during 2010 and 2011, according to data compiled by Bloomberg. That may lessen optimism tied to the fact that volatility has receded 18 percent since year-end, as well as damp enthusiasm for offerings of new stock, Palmer said.

“We’re not massively excited about IPO prospects this year in terms of being a much higher volume number than last year,” Palmer told reporters at a briefing. “There are still plenty of market indicators saying it’s not necessarily a time to hit the window right now, particularly for economically sensitive businesses.”

Companies raised about $39 billion in U.S. IPOs in 2011, Bloomberg data show, and “something in the low 40s would seem to make sense” for 2012, Thomas Fox, UBS’s New York-based head of capital markets for the Americas, said at the briefing.

Investors will seek IPOs that promise growth, Palmer said, even as global economic expansion is estimated at 2.3 percent for 2012, Bloomberg data show. Buyers will be interested in “companies that have very clear, visible and strong growth rates in the context of very, very soggy economies around the world,” Palmer said.

To contact the reporter on this story: Lee Spears in New York at

To contact the editor responsible for this story: Jennifer Sondag at

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