The first
three quarters of 2023 have shown a notable shift in the global initial public
offering (IPO) market. With a decline of 5% in IPO volumes and a decrease of 32% in
proceeds year-over-year (YoY), investor appetite is changing. According to the
newest EY Global IPO Trends report, factors such as tightening
liquidity, evolving interest in emerging markets, and declining unicorn IPOs
are reshaping the landscape.
Finance
Magnates discussed
the report’s findings with the Global EY IPO Leader, George Chan. According to Chan,
the decline in the number and value of IPOs was caused by regulatory factors, a
decrease in investor confidence, and a decline in materials companies.
The global
IPO scene witnessed 968 IPOs with a capital of $101.2 billion, marking a drop of 5% and
32% YoY. In the Asia-Pacific region, Mainland China’s IPO market has
slowed due to regulatory measures, while Hong Kong has seen less activity owing
to higher interest rates and dwindling investor confidence.
Australia’s
IPO issuance has plummeted, especially in the materials sector. Although
the US experienced a slight uptick in IPO numbers, Canada saw its IPO volume
more than halve, mainly because of a drop in materials companies.
The decline
in IPO proceeds is even more significant. The number of mega-deals has halved
compared to last year, contributing to weaker post-IPO share price performance.
Landmark IPOs from last year in sectors like energy and luxury cars have not
been matched this year. The top IPOs for 2023 are only about half the size of
2022’s largest offerings.
Challenging market conditions continue to dampen listing activity on the London IPO market in Q3 2023:
📉5 listings raised £359.8m
🌐Global IPO activity proceeds fell 32% year-on-year
📢Technology sector continues to dominate global IPO activity, followed by Industrial sector
— EY UKI (@EY_UKI) October 4, 2023
“As
there were no mega Chinese Foreign Private Issuers (FPIs) returning from the US
this year, both the average deal size and total deal value decreased,” Chan
commented in an interview with Finance Magnates. “In contrast, last
year saw two blockbuster Chinese FPIs with proceeds of US$8.2b and US$5.1b,
respectively, delisted from the US and re-joined the A-share market.”
Markets in
the Middle East, particularly Saudi Arabia and the UAE, showed reduced IPO
activity compared to when energy prices were high last year.
Better Perspectives in
Emerging Markets
Despite
these setbacks, Q3 brought signs of improved post-IPO share performance. The
market is currently influenced by a variety of elements, including robust
activity in emerging markets and a more restrained China IPO sector.
Over the
past decade, emerging markets have seen an increase of more than 30% in IPO numbers
and proceeds, primarily due to faster economic growth compared to developed
nations. In 2023 alone, these markets accounted for 77% of the global share by
number and 75% by value. New entrants like Turkey and Romania are joining the
already active markets like Indonesia, Malaysia, and India.
“Turkish
stock buyers are flocking to new share offerings, driven by the potential for
substantial returns and the need to safeguard against rising inflation,”
Chan commented. Around 40 companies have gone public recently, all of which
have yielded impressive returns in the after-market.
The IPO
activity surge is driven by investor demand and smaller companies seeking
alternative financing channels in light of Turkey’s credit tightening.
“This
trend mirrors patterns observed in other high-inflation countries with weakened
currencies and could potentially continue to attract new entrants, provided the
country’s fiscal backdrop remains unchanged,” the Global EY IPO Leader added.
Romania also
marked a significant milestone with the $2 billion IPO of a state-owned
renewable energy company in July, making it the largest-ever listing in the
country. This listing has boosted the liquidity and investor interest in the
Bucharest Stock Exchange and highlighted the company’s strong EBITDA margin and
focus on green energy.
Three Sectors Dominate IPO
Activity
The
technology sector is still a major player in the 2023 IPO landscape, although its
proceeds would decline if blockbuster chip designer IPOs were excluded.
Meanwhile, industrials have solidly secured the second spot. Unicorn IPOs,
particularly in growth sectors like technology and health, have seen a massive
decline of more than 80% in both volume and proceeds.
“Software,
semiconductor, and electronics are the top 3 IPO sub-sectors that have
dominated the IPO issuance in the technology sector for over a decade,” Chan
revealed.
The 3Q 2023 #IPO market built on improvement seen in the 2nd quarter but the upward trend is still uncertain. Cautious optimism is the watchward. More in my free-to-read Analysis piece. @bloomberglaw https://t.co/0hHbRHrg0g
— Preston Brewer (@PrestonBrewer16) October 6, 2023
While most
sub-sectors declined within the technology sector in a YoY
comparison, the electronics sub-sector demonstrated growth in deal number and
value, with companies involved in diverse electronic component production and
distribution aspects.
Regional Performance
The
Americas region has shown an increase of 159% in proceeds, with the US contributing
the most. For example, in 2022, 70% of the largest global IPOs took place on Nasdaq. However, Special Purpose Acquisition Company IPOs are at a
seven-year low, signaling a shift in market focus.
“In
the context of the 159% growth rate in IPO proceeds in the Americas, the US has
experienced an increase of over 160%, while Canada has a decrease of over 40%.
The surge in the US IPO proceeds is primarily attributable to the three large
technology IPOs listed in September, along with a mega consumer product
carve-out in May,” Chan added.
Despite
holding nearly 60% of the global market share, Asia-Pacific has seen a YOY decrease of 8% and
41% in IPO volume and proceeds, respectively. Yet, optimism
remains for large deals in the pipeline. In addition, With 286 IPOs and $21.9
billion raised, EMEIA markets have adapted well to tighter financial
conditions. There’s a rising trend in the energy sector and ESG-related IPOs.
What the Future Holds
The global
IPO market is in flux, influenced by various economic and sectoral factors.
Investors are increasingly looking for value over growth, a trend likely to
continue given the current economic conditions. Companies looking to go public
will need to be agile, financially healthy, and open to technological
advancements to succeed in this evolving landscape.
“Investors
are now focusing on companies with strong fundamentals due to tighter liquidity
and higher capital costs,” Chan commented.
The change
from an era of “cheap money” to a setting of sustained higher
interest rates is causing investors to adjust their investment strategies. The
focus has shifted towards high-quality IPO opportunities that offer compelling
equity narratives, strong management teams, and the potential for long-term
growth and value creation. Investors are now more selective, prioritizing
companies that demonstrate sustainable profitability.
In tune
with the evolving investment landscape, several high-profile companies have
indicated their plans to go public, effectively serving as a barometer for
investor appetite in the European and US markets. As Chan forecasted, these
companies’ movements are closely watched as they could trigger the next wave of
IPOs and provide valuable insights into market valuations and demand.
The first
three quarters of 2023 have shown a notable shift in the global initial public
offering (IPO) market. With a decline of 5% in IPO volumes and a decrease of 32% in
proceeds year-over-year (YoY), investor appetite is changing. According to the
newest EY Global IPO Trends report, factors such as tightening
liquidity, evolving interest in emerging markets, and declining unicorn IPOs
are reshaping the landscape.
Finance
Magnates discussed
the report’s findings with the Global EY IPO Leader, George Chan. According to Chan,
the decline in the number and value of IPOs was caused by regulatory factors, a
decrease in investor confidence, and a decline in materials companies.
The global
IPO scene witnessed 968 IPOs with a capital of $101.2 billion, marking a drop of 5% and
32% YoY. In the Asia-Pacific region, Mainland China’s IPO market has
slowed due to regulatory measures, while Hong Kong has seen less activity owing
to higher interest rates and dwindling investor confidence.
Australia’s
IPO issuance has plummeted, especially in the materials sector. Although
the US experienced a slight uptick in IPO numbers, Canada saw its IPO volume
more than halve, mainly because of a drop in materials companies.
The decline
in IPO proceeds is even more significant. The number of mega-deals has halved
compared to last year, contributing to weaker post-IPO share price performance.
Landmark IPOs from last year in sectors like energy and luxury cars have not
been matched this year. The top IPOs for 2023 are only about half the size of
2022’s largest offerings.
Challenging market conditions continue to dampen listing activity on the London IPO market in Q3 2023:
📉5 listings raised £359.8m
🌐Global IPO activity proceeds fell 32% year-on-year
📢Technology sector continues to dominate global IPO activity, followed by Industrial sector
— EY UKI (@EY_UKI) October 4, 2023
“As
there were no mega Chinese Foreign Private Issuers (FPIs) returning from the US
this year, both the average deal size and total deal value decreased,” Chan
commented in an interview with Finance Magnates. “In contrast, last
year saw two blockbuster Chinese FPIs with proceeds of US$8.2b and US$5.1b,
respectively, delisted from the US and re-joined the A-share market.”
Markets in
the Middle East, particularly Saudi Arabia and the UAE, showed reduced IPO
activity compared to when energy prices were high last year.
Better Perspectives in
Emerging Markets
Despite
these setbacks, Q3 brought signs of improved post-IPO share performance. The
market is currently influenced by a variety of elements, including robust
activity in emerging markets and a more restrained China IPO sector.
Over the
past decade, emerging markets have seen an increase of more than 30% in IPO numbers
and proceeds, primarily due to faster economic growth compared to developed
nations. In 2023 alone, these markets accounted for 77% of the global share by
number and 75% by value. New entrants like Turkey and Romania are joining the
already active markets like Indonesia, Malaysia, and India.
“Turkish
stock buyers are flocking to new share offerings, driven by the potential for
substantial returns and the need to safeguard against rising inflation,”
Chan commented. Around 40 companies have gone public recently, all of which
have yielded impressive returns in the after-market.
The IPO
activity surge is driven by investor demand and smaller companies seeking
alternative financing channels in light of Turkey’s credit tightening.
“This
trend mirrors patterns observed in other high-inflation countries with weakened
currencies and could potentially continue to attract new entrants, provided the
country’s fiscal backdrop remains unchanged,” the Global EY IPO Leader added.
Romania also
marked a significant milestone with the $2 billion IPO of a state-owned
renewable energy company in July, making it the largest-ever listing in the
country. This listing has boosted the liquidity and investor interest in the
Bucharest Stock Exchange and highlighted the company’s strong EBITDA margin and
focus on green energy.
Three Sectors Dominate IPO
Activity
The
technology sector is still a major player in the 2023 IPO landscape, although its
proceeds would decline if blockbuster chip designer IPOs were excluded.
Meanwhile, industrials have solidly secured the second spot. Unicorn IPOs,
particularly in growth sectors like technology and health, have seen a massive
decline of more than 80% in both volume and proceeds.
“Software,
semiconductor, and electronics are the top 3 IPO sub-sectors that have
dominated the IPO issuance in the technology sector for over a decade,” Chan
revealed.
The 3Q 2023 #IPO market built on improvement seen in the 2nd quarter but the upward trend is still uncertain. Cautious optimism is the watchward. More in my free-to-read Analysis piece. @bloomberglaw https://t.co/0hHbRHrg0g
— Preston Brewer (@PrestonBrewer16) October 6, 2023
While most
sub-sectors declined within the technology sector in a YoY
comparison, the electronics sub-sector demonstrated growth in deal number and
value, with companies involved in diverse electronic component production and
distribution aspects.
Regional Performance
The
Americas region has shown an increase of 159% in proceeds, with the US contributing
the most. For example, in 2022, 70% of the largest global IPOs took place on Nasdaq. However, Special Purpose Acquisition Company IPOs are at a
seven-year low, signaling a shift in market focus.
“In
the context of the 159% growth rate in IPO proceeds in the Americas, the US has
experienced an increase of over 160%, while Canada has a decrease of over 40%.
The surge in the US IPO proceeds is primarily attributable to the three large
technology IPOs listed in September, along with a mega consumer product
carve-out in May,” Chan added.
Despite
holding nearly 60% of the global market share, Asia-Pacific has seen a YOY decrease of 8% and
41% in IPO volume and proceeds, respectively. Yet, optimism
remains for large deals in the pipeline. In addition, With 286 IPOs and $21.9
billion raised, EMEIA markets have adapted well to tighter financial
conditions. There’s a rising trend in the energy sector and ESG-related IPOs.
What the Future Holds
The global
IPO market is in flux, influenced by various economic and sectoral factors.
Investors are increasingly looking for value over growth, a trend likely to
continue given the current economic conditions. Companies looking to go public
will need to be agile, financially healthy, and open to technological
advancements to succeed in this evolving landscape.
“Investors
are now focusing on companies with strong fundamentals due to tighter liquidity
and higher capital costs,” Chan commented.
The change
from an era of “cheap money” to a setting of sustained higher
interest rates is causing investors to adjust their investment strategies. The
focus has shifted towards high-quality IPO opportunities that offer compelling
equity narratives, strong management teams, and the potential for long-term
growth and value creation. Investors are now more selective, prioritizing
companies that demonstrate sustainable profitability.
In tune
with the evolving investment landscape, several high-profile companies have
indicated their plans to go public, effectively serving as a barometer for
investor appetite in the European and US markets. As Chan forecasted, these
companies’ movements are closely watched as they could trigger the next wave of
IPOs and provide valuable insights into market valuations and demand.
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- Source: https://www.financemagnates.com//fintech/why-investors-are-ditching-unicorns-for-emerging-market-ipos/
