The global IPO landscape has witnessed a mixed performance in the second quarter of 2023, reflecting the challenges posed by slower economic growth, geopolitical tensions, and tight monetary policies. However, emerging markets have shown resilience, benefiting from factors such as rich mineral resources, a burgeoning population, and the rise of unicorns and entrepreneurial SMEs, according to the EY Global IPO Trends Q2 2023 report.
The technology sector has maintained its dominance in IPO activities throughout 2023. However, the energy sector has experienced a decline in IPO proceeds due to softer global energy prices. Cross-border activity has witnessed a significant surge, fuelled by the influx of investments from China into the US and steady flows into the Swiss Stock Exchange.
The special purpose acquisition company (SPAC) market has faced increasing complexity in negotiations. Numerous SPACs are yet to announce or complete a de-SPAC, risking liquidation within the next six months. However, it is anticipated that SPAC IPO activities will eventually return to a more sustainable level, resembling pre-2021 levels.
Q2 exhibited better performance than Q1 across regions. In the Americas, despite a flat number of IPOs, proceeds witnessed an 86% increase year-on-year (YOY), primarily driven by a significant spin-off IPO that marked the largest US IPO since November 2021. The positive developments and recent improvements in market sentiment in the US indicate a potential rise in IPO activity in the latter half of 2023 or 2024. However, the overall Americas IPO market may take longer to recover due to the unforeseen banking crisis in 2023.
The Asia-Pacific region maintained its leading position in terms of IPO volume and value, contributing approximately 60% of global IPOs. Mainland China and Japan accounted for half of the top 10 global IPOs. However, a cooler-than-expected IPO market in Mainland China led to a decline in IPO proceeds. Notably, Indonesia surpassed Hong Kong in the global stock exchange rankings by deal number.
EMEIA witnessed a decline in IPO activity, with 167 listings raising $12.4 billion year-to-date (YTD). This represents a 12% and 50% fall in volume and proceeds respectively. Nevertheless, the region remains the second-largest IPO market, accounting for 27% of all IPO deals. India exchanges emerged as the top spot in terms of deal count. However, inflation levels and liquidity constraints in European countries continue to impede IPO activity.
"Against the backdrop of a divergent global economy and unpredictable geopolitical landscape, some stock markets are reaching a long-time high and enjoying low volatility,” said Paul Go, EY Global IPO Leader. “Certain theme-centric sectors such as technology and clean energy are signalling an upswing in IPO activity. Large, well-established companies are demonstrating enduring resilience, while growth narratives with more realistic and acceptable valuation are becoming more receptive by the market. In this shifting environment, companies need to prepare now to be 'IPO-ready' for any forthcoming windows."
The second half of 2023 is anticipated to witness a resurgence in global IPO activity as economic conditions and market sentiment gradually improve. Major markets may witness an increase in corporate spin-offs and carve-out listings as companies aim to create shareholder value through divestiture. Investors are likely to gravitate towards mature, profit-making businesses amidst a yet-to-revive IPO market.
While challenges persist, emerging markets, technology sectors, and cross-border activities offer glimpses of growth. Understanding the specific requirements of each IPO market and considering alternative IPO processes and financing methods will be crucial for companies seeking successful IPOs. As economic conditions evolve, it is vital for companies to adapt and remain poised for future IPO opportunities.
