EY: IPO proceeds down 32% globally

Globally, 968 IPOs were registered in the first three quarters of 2023, with a capital raised of $101.2 billion, down 5% or 32% year-on-year, according to a report published by EY . Despite this fact, market momentum is consolidating, with a notable improvement in post-IPO share price performance in the third quarter, compared to previous quarters, notes the quoted source.

According to the EY Global IPO Trends study, after three quarters of 2023, the global IPO market has experienced a changing dynamic, characterized by the improvement of market confidence in the main Western countries, the prospect of top IPOs in the US, strong emerging markets and a slowdown in IPO activity in China.

In the last decade, both the number of IPOs and proceeds from emerging markets have increased by more than 30%, mainly due to faster economic expansion compared to developed countries. By this point in 2023, emerging markets accounted for 77% of the global share by number and 75% by value, notes EY. These also included new entrants into the arena of active IPOs, such as Turkey and Romania, in addition to already flourishing countries such as Indonesia, Malaysia and India. In developed markets, the US saw a higher number of large deals, while Japan and Italy contributed to the increase in smaller deals.

• EY: Tech sector dominates IPO activity

The tech sector continues to dominate global IPO activity in 2023, according to the source cited. However, excluding the successful IPO of chip designer Arm, the sector as a whole saw a decline in revenue. There has not been a substantial increase in IPOs for artificial intelligence (AI) startups, but they are starting to appear on the IPO circuit, according to EY. The industrial sector moved into second place on the back of solid expansion in most of its subsectors. On the other hand, unicorn IPOs have seen a substantial decline in volume and proceeds of more than 80% compared to the previous year, especially in classic growth sectors such as technology, healthcare and life sciences, according to the cited report. .

• EY: Post-IPO share price improved in all regions

The Americas region saw a remarkable 159% year-over-year increase in proceeds, reaching $19.3 billion in the first three quarters of 2023. Of the 113 IPOs this year, 96 originated in the US.

The US is also the only market that has attracted more cross-border IPOs and the much-anticipated blockbuster IPOs. Special Purpose Purchase Company (SPAC) IPO activity so far in 2023 has reached a seven-year low in terms of revenue and has fallen to levels not seen since 2016. In while the traditional IPO market is showing signs of recovery, SPAC IPO activity will likely moderate in the short term as the focus shifts to the completion or liquidation of upcoming de-SPACs, according to EY.

The first nine months of 2023 present a mixed picture for Asia-Pacific IPOs, with volumes and proceeds down 8% and 41% year-on-year, respectively, even though the region accounts for around 60% of the global market. Governments in most of the region are trying to stimulate economic growth and IPO activity through initiatives such as reducing stamp duties. Also, due to weakness in key markets, Asia-Pacific has seen fewer transactions over the past two years. There is general optimism about large deals underway, with a modest increase in initial public offerings expected in the next quarter or early 2024, according to EY.

Year-to-date, there have been 286 initial public offerings in EMEIA (Europe, Middle East, Africa and India), raising $21.9 billion, a 2% increase in volume over the previous year, but a 44% reduction in receipts. Stock markets based in EMEIA have adjusted to a "new normal" amid tightening financial conditions and market liquidity, but have remained surprisingly robust and stable, with investors showing increased confidence. A distinct trend in EMEIA is the growing interest in initial public offerings in the energy sector, along with environmental, social and governance (ESG) actions, notes EY.

• George Chan, EY: "Investors are moving towards companies with solid fundamentals"

George Chan, EY Global IPO Leader, says: "Faced with tighter liquidity and a higher cost of capital, investors are turning to companies with solid fundamentals and good profitability prospects. In response, IPO prospectuses must demonstrate financial strength and potential for value creation. As valuation gaps narrow, investors are looking at the post-listing performance of the new batch of IPOs, which, if positive, could renew market confidence."

In major Western economies, interest rates are expected to remain high as central banks try to bring lingering inflation to target levels. As a result, the cost of capital remains high, which, along with tightening credit, makes financing more difficult, according to EY.

Investors will continue to focus more on fundamentals such as a strong balance sheet, healthy cash flows and resilience in weak economic conditions. Investors are also likely to be more interested in companies with an ESG concept and those that can demonstrate the adoption of AI applications in business models and operations.

IPO candidates will need to be nimble with innovative business models, resilient when faced with supply chain constraints and macroeconomic challenges, have solid working capital and be able to adapt to new ways of doing business. to do business by adopting AI technology and applications, concludes the EY report.