299 IPOs Raise $21.5 Billion in Global Markets in Q1-2023
The global markets witnessed as many as 299 Initial Public Offerings (IPOs) raising $21.5 billion in Q1-2023 owing to interest rate rises, a lukewarm stock market, entrenched inflation, and unexpected global banking industry turbulence.
According to the latest report from EY entitled “EY Global Trends IPO Trends for Q1 of 2023,” despite this ongoing uncertainty around the economic and geopolitical environment, the IPO pipeline continues to build up and hope remains for a turnaround later this year.
Technology companies, which have been a mainstay of IPO activity in recent years, experienced some sharp declines in valuations, and the turmoil in the crypto markets and global banking industry has not helped. While technology continued to lead in IPO volume, four of the top 10 listings in Q1 2023 were in the energy sector.
High liquidation and poor post-listing performance of de-SPACs dampened investors’ appetite for new IPOs. This quarter, SPAC IPO activity was at one of its lowest levels in recent years – it hit a six-year low in terms of volume, with proceeds also down to levels not seen since 2016.
As market conditions remain challenging and many promoters of SPACs listed in early 2021 need to complete or unwind their transactions, SPAC IPO activity is likely to be muted in the near term.
The Americas IPO activity was in line with Q1-2022, but it was well below the levels seen in comparable periods over the last decade, finishing out this quarter with 40 deals and $2.6 billion in proceeds, up 11% and up 9%, respectively, YOY. On the US exchanges, there were 31 deals, eight of which were more than $50 million.
Meanwhile, Canada saw its biggest IPO since May 2022, raising over $100 million in proceeds. “Even though IPO activity levels have been on the lighter side, we have begun to see some early positive developments in the areas of inflation, interest rates, valuations and market volatility, which could set the stage for a potential recovery in the Americas IPO market,” EY said in the report.
Asia Pacific’s Wait and See Stance
Even though the Asia-Pacific IPO market accounted for 59% of global IPO deals, its activity declined 6% by number and plummeted 70% by proceeds, respectively, YOY, recording only 175 deals and $12.7 billion in proceeds for the quarter.
Despite the lifting of almost all its pandemic control measures earlier this year, the mainland China market was a bit quieter than usual, but it is on a healthy projected track and still accounts for more than 40% of all global IPO proceeds.
Hong Kong, also usually a powerhouse for new listings, was uncharacteristically quiet. Overall, Asia-Pacific, took a “wait and see” attitude, as investors kept their powder dry and looked for further indicators of market recovery.
As many companies withdrew or postponed their IPO filings due to market conditions, EMEIA IPO activity fell by 19% and 36% by number and proceeds, respectively, YOY, recording 84 IPOs raising $6.2 billion.
India as a region had the greatest drop in proceeds for EMEIA, with a sharp decline of 83%, even though it had a 50% increase in the number of listings. Globally, this quarter, the Middle East was also the only region with a mega IPO. Despite positive economic indicators, sentiment remains cautious, with investors being selective in a buyers’ market, seeking profitable and sustainable business cases.
Despite the unforgiving economic and geopolitical backdrop, there is light on the horizon, with peaking inflation, energy prices softening, and the rebound of mainland China’s economy. However, the backlog for IPOs is continuing to build as companies are holding out for the stock market to stabilize and rebound before listing.
In an unpredictable and persistent inflationary environment, investors who were previously oriented toward funding growth and potential are now more focused on the path to profitability and cash flows. Collaboration between governments, including cooperation and stock-connect programs, along with investor appetite for diversity, could also lead to a wave of dual listings and cross-border deals this year.
Businesses will need to navigate high-cost and reduced liquidity environment for a little longer. Once there is evidence of a more stable market with higher certainty, investor confidence should return, and prominent companies that have postponed IPO plans may restart, albeit at more modest valuations.
Paul Go, EY Global IPO Leader, said that amidst persistent macroeconomic and geopolitical uncertainty, exacerbated by stress in the global banking system, IPO windows are fleeting and funding conditions are getting tougher, with investors prioritizing value over growth.
“IPO-bound companies need to focus on building sustainable businesses with strong fundamentals to be well-positioned in a volatile environment and meet the challenges and opportunities of going public,” Go added.