Globally, the year-to-date (YTD) 2023 recorded 615 IPOs with US$60.9 billion raised in capital, representing a 5% and 36% decrease year-over-year (YOY). In Q2, larger deals came to the market compared to Q1, despite the slow recovery.
These modest results reflect slower global economic growth, tight monetary policies, and heightened geopolitical tensions. However, some emerging markets are experiencing a boom in IPO activities due to their rich mineral resources, large population, growing unicorns, and entrepreneurial SMEs. These and other findings are available in the EY Global IPO Trends Q2 2023 report.
While the technology sector continues to be the leading sector in IPO activities in 2023, IPO proceeds raised by energy sector companies have dwindled due to softer global energy prices.
Additionally, cross-border activity has surged significantly in both volume and proceeds, mainly attributed to the growing influx of investments from China into the US and a steady flow into the Swiss Stock Exchange.
The special purpose acquisition company (SPAC) market continues to face challenges, with negotiations becoming increasingly complex. There is still an exorbitant number of SPACs that are yet to announce or complete a de-SPAC, facing liquidation by the expiration period in the next six months.
However, it is expected that SPAC IPO activities will return to a more sensible and sustainable level, similar to the levels seen pre-2021.
Overall regional performance shows that Q2 performed better than Q1. While the number of IPOs remained flat, the Americas region saw an 86% increase in proceeds, raising US$9.1 billion YOY.
This growth was primarily attributed to a single mega spin-off IPO, which happened to be the largest US IPO since November 2021. The US experienced an uptick driven primarily by a few large deals, and recent improvements in market sentiment could indicate the possibility of more US IPO activity later in 2023 or 2024.
However, despite these positive developments, the overall Americas IPO market may take longer to recover than many market participants initially forecasted, due to the unforeseen banking crisis in 2023.
In the Asia-Pacific IPO market, YTD, it has maintained its position as the global leader in IPO volume and value, with an approximate 60% share. Half of the top 10 global IPOs were from Mainland China, and one was from Japan.
The region saw 371 IPOs raising US$39.4 billion in this period, a YOY fall of 2% and 40%, respectively. The decrease in proceeds was primarily due to a cooler-than-expected Mainland China IPO market, with many large IPOs waiting on the sidelines. Notably, Indonesia has surpassed Hong Kong in the global stock exchange rankings by deal number.
The Southeast Asia region experienced a YOY rise in IPO volume of 26% (from 65 deals in YTD 2022 to 82 deals YTD 2023) and value of 31% (from US$2.5 billion in YTD 2022 to US$3.3 billion in YTD 2023).
Indonesia has been a shining light in the region, hosting 45 IPOs in the first half of the year, with total proceeds of US$2.2 billion. Boasting a vast population and robust economic growth, the country is propelled by its rich mineral reserves – vital for green energy production – and strategic privatization of state-owned enterprises.
Aside from Indonesia, Malaysia has seen a string of small-cap tech IPOs raising US$0.5 billion in 16 deals, while Thailand has hosted listings from a diverse range of sectors that raised US$0.5 billion in 15 deals in the first half of 2023. The Philippines (3 IPOs raising US$77.7 million) and Singapore (3 IPOs raising US$21.1 million) also participated in the IPO activity.
EMEIA IPO activity has continued to shrink, with 167 listings raising US$12.4 billion YTD, a 12% and 50% fall YOY, respectively. Despite this, the region still holds its position as the second-largest IPO market with 27% of all IPO deals and saw the second-biggest IPO at US$2.5 billion.
India’s exchanges have also broken a two-decade streak, jumping to the top spot in deal count. However, inflation levels in most European countries remain challenging, and the lack of liquidity continues to hold back IPO activity.
Paul Go, EY global IPO leader, said: “Against the backdrop of a divergent global economy and unpredictable geopolitical landscape, some stock markets are reaching an all-time high and enjoying low volatility.
“Certain theme-centric sectors such as technology and clean energy are signaling an upswing in IPO activity. Large, well-established companies are demonstrating enduring resilience, while growth narratives with more realistic and acceptable valuations are becoming more receptive to the market.
“In this shifting environment, companies need to prepare now to be ‘IPO-ready’ for any forthcoming windows.”
2H23 outlook
The pipeline is still on hold. A resurgence in global IPO activity is anticipated to start late in 2023 as economic conditions and market sentiment gradually improve with the tight monetary policy entering its final stage. After the one mega spin-off IPO debut in the US that outshone all other traditional IPOs, there are strong indications that this trend will persist.
Large corporate spin-offs and carve-out listings will likely surface across major markets, as companies seek to create more shareholder value through divestiture while investors lean toward mature, profit-making businesses amid a yet-to-revive IPO market.
Understanding the different requirements of each IPO market that companies plan to enter is essential to meet investor expectations and avoid potential delays due to regulatory issues.
Investors will continue to be more selective, orienting toward companies with solid fundamentals and a proven track record. All options, from alternative IPO processes (direct listing or de-SPAC merger) to other financing methods (private capital, debt, or trade sale), should be considered.
