Uncertainty is the operative word for 2019. Uncertainty surrounds trade agreements, growth forecasts, interest rates and political manoeuvring. Unlike legal and tax changes which tend to cause a short-term reaction before becoming the new norm, these factors are unpredictable. And this uncertainty about the future bleeds into the world view, feeding stock exchange swings, currency fluctuations, IPO valuations and ultimately, the M&A market. 

However, the Offshore region has a number of strengths which come to the fore at delicately balanced moments such as this. It has a renowned ability to provide swift, efficient and cost-effective support to international M&A deals, listings, incorporations and restructurings. And it has the skills and imagination to provide a wide range of methods of accessing the markets even in the face of a more challenging investment period.

A MORE CAUTIOUS ENVIRONMENT

In 2018 the ten largest deals were each worth well over four billion dollars but there have only been three of that size and scale so far this year. These megadeals typically originated from China or the US and have largely been curtailed in the face of trade wars, risk uncertainty and national security issues.

Some companies are waiting for geopolitical uncertainties to pass, and IPOs in most regions of the world are down on 2018 levels. High profile falls in value of some recently listed tech companies have also underlined the difficulty in correctly pricing such unique new enterprises but nevertheless, IPOs continue to offer an attractive route for many companies to raise money. 

The offshore region saw 144 companies announce their intention to list on an exchange. The top sector for announced offshore IPOs was information services with data processing companies hoping to use the extra investment to increase market share in this rapidly-evolving field.  Manufacturers of electronics and machinery have also been busy issuing prospectuses, hoping to fund product development and enhance operating capacity. 

An interesting new development has been the growing popularity of Special Purpose Acquisition Companies (SPACs). These are vehicles that raise funds through IPO and then deploy them once the right target is identified. These ‘blank cheque’ companies often incorporate in Cayman or BVI before their listing in the US and 2019 looks set to be a banner year with both volume and amounts raised powering ahead of previous years.

IPOs may decline in the face of stock market and political volatility but the offshore region has already facilitated a number of Direct Listings (for example Flex LNG in Bermuda) which are a viable alternative option. And well-prepared companies, with the right equity story, will continue to make the leap to public listing when the timing is right.

POPULAR EXCHANGES FOR OFFSHORE COMPANY LISTINGS

So far 79 offshore companies have successfully completed their public listing in 2019, adding to the considerable number of such companies that are listed around the world. While offshore companies can be found on all manner of exchanges, from Korea to Israel to Canada, the main three hotspots are London, the US and Hong Kong. 

As might be expected, Crown Dependency (Guernsey, Isle of Man and Jersey based) companies feature mostly on the London Stock Exchange and its Alternative Investment Market for smaller growing companies, while Bermuda, BVI and Cayman companies frequently show up on the NYSE and Nasdaq. What is less well known is that the Hong Kong main market and its related Growth Enterprise Market (GEM) are dominated by offshore companies with Asian companies often finding the relative simplicity of Bermuda and the Cayman Islands company law attractive along with plenty of offshore legal support available locally. 

This is illustrated by the fact that over 1,800 Cayman and Bermuda companies are currently listed in Hong Kong, of which Appleby has brought 375 to market. This is in comparison to just over 500 companies listed in Hong Kong by any other country.

OFFSHORE-I

This analysis forms part of Appleby’s half yearly Offshore-i report. Offshore-i is an Appleby report that analyses offshore deal data and provides expert insight into the world of offshore transactions. To find out more visit applebyglobal.com/offshore-i. 

This publication is for general guidance only and does not constitute definitive advice
© Appleby Global Group Services Limited 2019.