The news that European equity primary market volume in the first quarter of 2004 is up an impressive 157% on the same period last year sounds good. However, dig down into the details and the story looks less encouraging.
The $13.3 billion of issuance of new shares in the first quarter is barely more than it was at its lowest point in 2003. Moreover, Euromoney analysis of Dealogic data shows that the rise in ECM headline volume masks a decline in new equity capital raising by companies.
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Primary issuance exceeded secondary issuance in all but the third quarter of 2003, in which KfW's record-breaking e5 billion exchangeable into Deutsche Telekom shares increased the volume figure for secondary offerings. The volume of primary shares, that is new shares issued for the first time, in the first quarter of 2004 by contrast is 35% lower than the volume of secondary, pre-existing shares being reissued.
ECM volume is being driven by monetization on behalf of private-equity firms and other vendors and not corporate capital raising for the funding of growth or balance sheet restructuring.