The business of accessing capital is getting tougher, in which ever corner of the world your boardroom happens to be sited.
The first month of the year saw a rise in the number of IPOs either postponed or pulled globally, while the total volume of failed deals in the month more than tripled. Overall, equity raising fell 9 per cent, according to Thomson Financial, though a 41 per cent fall in follow-on offering was partially offset by an 80 per cent leap in issuance of convertibles – thanks in part to all that banking paper being dispatched to the sovereign wealth funds of the world.
On the debt side the picture is hardly more rosy. Banks are getting much more picky about who they lend to and for what – which may be no bad thing. Loan issues globally fell 76 per cent month on month.
In overall bulk, the US leads the pack, topping the tables for both debt and equity issuance, despite the fact that the three largest IPOs came out of India, Saudi Arabia and Vietnam in the month.
But the backdrop for new businesses seeking capital stateside has become markedly less attractive, according to the Milken Institute. Their latest Capital Access Index, which monitors the ability of nations globally to support entrepreneurial activity through providing access to funding, places the US outside the top 10 on the back of an ailing macroeconomic outlooks, more volatile interest rates and higher inflation. The US slumped from 5th to 11th.
As capital continues to flow into emerging countries, notably in Asia, it becomes harder for developed markets to remain competitive, with all of the top ten posting decreased scores for international access to capital. Hong Kong retained its top spot, followed by the UK, Canada and Singapore. Worth noting that China rises, but only to 45th in the table, reflecting the constraints on smaller Chinese companies in tapping capital.
The Milken Institute’s determinedly quantitative method aims to capture a broad picture of economies, across macroeconomics, banking and finance, the equity and bond markets, and alternative sources of capital. But with the US down at 11, nestled between Finland and Norway on the one hand and Israel and Malaysia on the other, something looks a tad ridiculous. Even with a recession looming, can the USA really be only the 11th best place to set up and fund a business? We know where we’d rather be.