Companies Scrap IPOs Amid Russian Invasion of Ukraine

In the U.S., companies pulled equity-capital-markets transactions valued at $1.17 billion in February, up from the $350 million in deals that were withdrawn a year before, Dealogic said. There haven’t been new withdrawals since Feb. 26, as companies that wanted to hit the pause button have done so by now, bankers said.

“Looking at what’s getting done, my market is relatively closed,” said Josh Weismer, who heads the equity-capital-markets business at Mizuho Americas. “Ultimately, volatility is what rules the day,” Mr. Weismer said, adding that his colleagues in Europe are experiencing the same thing.

Stock markets around the world recorded significant losses in recent weeks, even before Russia attacked Ukraine. Since last week, many U.S. stocks have wobbled as oil prices climbed.

The Cboe Volatility Index, or VIX, which functions as a “fear gauge” and measures expected fluctuations in the S&P 500, stood at 30.48 on Thursday, down 0.85% from its previous close and lower than the 52-week high of 38.94. The volatility gauge tends to rise when markets fall.

“The geopolitical situation made it very easy for people to postpone,” Mr. Weismer said.

Efima Oy, a Finland-based company offering cloud services, decided to kill its planned listing on Nasdaq First North Growth Market, a division of Nasdaq Nordic.

“We were very unlucky with the timing of our IPO,” said Tero Salminen, chief executive of the 300-person company, adding that Efima started marketing its offering Feb. 8 and had planned to raise $15 million. “The Ukraine crisis started to accelerate during our offering period, and we lost the market’s trust,” Mr. Salminen said.

Fred. Olsen Windcarrier ASA, a Norwegian business that installs wind turbines on behalf of energy companies, said a few days before the Russian invasion that it would postpone its planned IPO on the Oslo Stock Exchange. “During the book building the market conditions for IPOs have been severely impacted,” the company said.

Other pulled deals include the IPO of FlexEnergy Green Solutions Inc. on Nasdaq’s main U.S. market, the listing of healthcare instruments firm Cardiva Medical Inc. on the New York Stock Exchange and the follow-on offering of Scana ASA, the parent company of a group of equipment and service providers to the marine industry, in Oslo, according to Dealogic. FlexEnergy declined to comment. Cardiva and Scana didn’t immediately respond to requests for comment.

OpenExchange Inc., a company that manages virtual IPOs on behalf of large investment banks, has seen a significant decline in early-stage roadshows that companies use to gauge investors’ appetite. “We were working on 75 deals in February. This month, it is down to five,” said Chief Executive Mark Loehr. “This is telling you that people are not even testing the waters.”

For companies looking to sell debt instead of placing equity, much depends on whether they have ties to Russia or not, said James Shepard, head of the investment-grade-debt capital-markets business at Mizuho Americas. “A company with a significant stake in the region probably wouldn’t go to market, or they would have to pay a high premium,” Mr. Shepard said.

Companies raised $62.89 billion through debt sales from Feb. 24 through Wednesday, down from $232.52 billion during the prior-year period. American, European and Russian businesses in recent days sold $33.48 billion in bonds to investors, down from $159.71 billion in bonds a year ago, Dealogic said.

Still, some deals went ahead while Russia prepared to attack Ukraine. Deutsche Bahn AG, a German railroad operator, sold a €750 million bond, equivalent to $829 million, to institutional investors a day before the Russian invasion. “We placed our bond on Wednesday before the attack came on Thursday,” said Levin Holle, the company’s chief financial officer. “If the uncertainty is very high, you don’t want to make transactions or you can’t price them reasonably.”

The war in Ukraine is coming on top of other challenges for companies, including high inflation, supply-chain problems and the prospect of higher interest rates in the U.S.

Over time, financing costs could rise, even for those businesses that have no exposure to Russia, executives said. “When the markets are nervous, that drives up the risk premiums and the cost of capital,” said Edward Stelmakh, the finance and operations chief of OptimizeRx Corp. , a health-technology company based in Rochester, Mich.

Bankers and executives said they are following the situation in Ukraine closely to assess when to potentially resume transactions. For IPOs to restart, the VIX would have to decline to the midteens, Mr. Weismer said, adding that for follow-on offerings, in which companies sell additional shares after an IPO, the index needs to be in a range of between 20 and 25.

Efima, the Finnish cloud company that last month canceled its IPO, is now considering alternative funding routes, Mr. Salminen said. “The IPO is still an option, but it depends on market conditions,” he added.

Write to Nina Trentmann at [email protected]