IPOs: Secret warning from Alibaba and Saudi Aramco

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Mega IPOs at the end of the yearThe hidden warning from Saudi Aramco and Alibaba to investors

Christoph Rottwilm

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The Singles' Day of Alibaba went well: Now the group wants to quickly collect billions on the Hong Kong Stock Exchange

China's online retailer Alibaba and Saudi oil company Saudi Aramco are making headlines with their planned IPOs. Both are in a hurry. For investors, this is a warning signal.

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Uber, Alibaba, Aramco and Co: The biggest IPOs in 2019

The year 2019, it seems clear now, was a good one for investors. The German index Dax stock market chart is currently showing more than 20 percent plus after plummeting in December 2018. Show the same for the midcap index MDax stock market chart. The US stock market has also rallied strongly in 2019, as measured, for example, by the broad US stock index S & P 500. The long stock market upswing, which started shortly after the financial and global economic crisis and has since gone through only a few correction phases, has therefore lasted another year.

But the nervousness is increasing. The US-Chinese trade conflict, ambiguity about the Brexit, weaknesses of the economy and cautious views of companies provide again and again for setbacks in the stock market. This was shown once more in the past few days when the year-end rally on the stock market, which had boosted the DAX well above the 13,300 mark mark, stuttered noticeably.

This is a recurring pattern: just when investors seem to have shaken off their worries, turbulence resurfaces, reminiscent of how deep the subdued nervousness in the stock market is now - especially at the already reached high price level. Investors do not want to miss potential gains, but at the same time they expect the prices to fall sharply.

Quickly go public before the stock market party is over

One indicator that clearly reflects the fundamental caution that has shaped stock market events for quite some time is the frequency and volume of initial public offerings. Companies that plan the corridor on the floor, do this with preference if they can assume that their offer meets the greatest possible buying mood. If this is not the case, IPOs like to be postponed until the mood has improved again.

In terms of share price performance, 2019 was a good stock market so far. However, a look at IPO business reveals a different picture: activities worldwide have so far been well below the average of recent years. And that should not change much by the end of the year.

As figures of the business consultancy Ernst & Young show, the first quarter of 2019 was weak in particular. The global IPO volume in the three months, at just $ 15.1 billion, was as low as it had been in three years. In the third quarter, the volume of around 40 billion dollars, 22 percent, and thus also significantly lower than the previous year.

Although experts from Ernst & Young expect the IPO activities to pick up in the fourth quarter. The problem is, this does not have to be a good sign, as a glance at the two probably biggest transactions in the rest of the year shows.

Also read: Uber, Alibaba, Saudi Aramco - the biggest IPOs of the year

Alibaba and Saudi Aramco are in a hurry - despite the recent unrest

For one thing, the online retail group Alibaba stock market chart will show its shares after the record IPO five years ago in New York in a few days, also in trading on the Hong Kong stock market. The initial public offering is expected to reach a volume of up to $ 12.9 billion, more than anyone else worldwide this year.

On the other hand, Saudi Arabia expects the first listing of its state-owned oil company Saudi-Aramco on the domestic stock exchange Tadawul in December. With a volume of up to 25.6 billion dollars, it may be the world's largest IPO ever, even larger than that of Alibaba 2014th After all, 20 billion dollars in revenue has already secured Saudi Aramco according to recent information.

So two mega-IPOs that are imminent - that may be a cause for concern for investors. After all, both issuers had already postponed their IPOs. Alibaba was startled by the troubled environment in Hong Kong, where demonstrations and violent clashes between students and the police have been going on for months. Apparently, the company did not want to annoy Beijing with an IPO in this scenario - concerns that are now apparently irrelevant.

The initial public offering of Saudi Aramco, for its part, was originally planned for the coming year and was then put on hold after the terrorist attacks on oil facilities in the kingdom in September. Now suddenly it is supposed to go very fast in Saudi Arabia.

Christoph Rottwilm on Twitter

@Christoph Rottwilm

The message is obvious: Both Alibaba and Saudi Aramco seem to have the hurry to collect the hoped-for billions on the stock market. Either they will do it later this year, or ...

Investors who are in euphoric year-end mood should be a reminder.

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• Shares price range set: Saudi Aramco heads the largest IPO in the world
• IPO canceled - Alibaba wants to "Beijing does not upset": Hong Kong crisis - even Alibaba bends Beijing

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