Recent disappointing results from AXA’s (AXA.PA) listing of its American division has led to the company’s scrambling to defend itself, as executives attempted to assured shareholders and potential financial backers that AXA’s financing remained sound. AXA is currently engaged in an attempt to acquire the XL Group, an effort that could demand some $15.3 billion, so its recent failure to raise less than expected with the debut of its U.S. division on the market could prove harmful.
For AXA, the IPO for its U.S. division went wrong at the worst time possible; though early expectations for the market debut of the company’s American division were high, they were soon dampened by relatively dismal results. Investors seemed less impressed in the company than most of its executives had hoped, as it IPO suffered from a shortfall of more than $1 billion, according to the Financial Times.
The failure to accrue the huge sum of capital that AXA had been hoping to generate with its market debut isn’t deterring the company’s chief executives, however. They’ve made it clear that they still have every intention of following through on their pursuit of XL Group, a venture likely to demand a bare minimum of $15 billion.
Referring to the company’s recent IPO results, AXA spokesman Emmanuel Touzeau noted that “the transaction is perfectly in line with the financing plan of the acquisition of the XL Group,” according to a statement released on Twitter.
While executives may be attempting to convince the public and their shareholders that their XL Group venture will remain unaffected by the IPO’s huge shortfall, the missing $1 billion will doubtlessly have to be made up for somewhere else in the company’s books. Experts on Wall Street have already intoned that if the company doesn’t come up with a way to guarantee it has the cash using merchant cash advance loans, it needs for its XL Group acquisition soon, it could face a beating in the market by shareholders who are skeptical about the future.
“With 3.4 billion euros still required to cover the XL purchase, AXA will need to find an alternative source of funding for 300-600 million on our calculations,” sources from Jefferies told Reuters.
On the bright side for the company, though its IPO fell far short of expectations, it still stands as one of the biggest market debuts this year, and drew serious interest from around the globe. AXA’s U.S. division is now confidently valued at around $11.22 billion, and the proceeds it generated from its IPO exceed those from any other company’s debut thus far into 2018.
With regulations continuing to tighten across industries that AXA’s U.S. division is involved in, it’s finding ventures like its acquisition of the XL Group to be an essential part of its future. XL Group’s status as a commercial insurer will doubtlessly help bolster AXA’s stock prices if it’s successfully acquired, but the recent shortfall of some $1 billion won’t be made up for easily.