- Geopolitical trade tensions continue to impact IPO activity
- Technology, health care and industrials were the most active sectors in YTD 2019
- Rebound to high IPO levels expected in 2020 once more favorable market conditions return
Technology, health care and industrials saw the largest share of IPOs in YTD 2019, together accounting for 407 IPOs (53% of global IPOs by deal volume) and raising a combined US$69.4b (61% of global proceeds). Technology continued to be the strongest sector by deal numbers and proceeds in YTD 2019, representing 23% of global deal volume (179 IPOs) and 36% of proceeds (US$41.5b). In Q3 2019, technology was also the strongest sector by deal numbers and proceeds and saw 59 IPOs (23% of global IPOs by deal volume) which raised US$11.4b (28% of global proceeds). These and other findings were published today in the EY quarterly report, Global IPO trends: Q3 2019.
EMEIA continues to face geopolitical headwinds
In EMEIA, deal volumes and proceeds were down from YTD 2018 with EMEIA exchanges posting 172 IPOs (a decline of 52%) and raising a total of US$21.1b (also a decline of 41%). Ongoing US-EU-China trade tensions have dampened both market sentiment and the economic outlook in EMEIA. At the same time, with no deal in sight, Europe and UK are bracing for the risk of a hard Brexit in Q4 2019.
Despite these challenges, EMEIA accounted for three of the top ten exchanges globally by proceeds in Q3 2019 (Deutsche Börse with US$1.7b from 1 IPO, NASDAQ OMX with US$1.3b from 3 IPOs and India’s National and Bombay Exchanges with US$858m from 9 IPOs). Cross-border IPO activity increased slightly to 10% in YTD 2019 from 9% in 2018. Additionally, investor sentiment and appetite for IPOs could improve in Q4 2019 due to a longer than expected low interest rate environment and supportive monetary policy.
Commenting on the findings of the report, Stelios Demetriou, Partner and Head of Transaction Advisory Services of EY Cyprus says: “Geopolitical uncertainties, have led to poor IPO activity across all markets in the third quarter and indeed throughout the year. In Europe in particular, the combination of ongoing US-China-EU trade issues and Brexit uncertainty have led to a sharp decline in IPOs this year. However, the backlog of some larger IPOs waiting for more favorable market conditions continues to grow, while, in Europe, the low interest rate environment is encouraging investors to look for high-return assets. As we move into the fourth quarter, which is traditionally the peak IPO season, we can expect IPO activity to pick up”.
Americas IPO markets impacted by quiet third quarter and equity market volatility On a quarterly basis, the Americas saw 47 IPOs that raised US$11.9b in Q3 2019, a drop of 30% by deal volume and 10% by proceeds from Q3 2018. Both YTD 2019 IPO deal volume and proceeds also fell behind compared with the same period in 2018, with 160 IPOs in the first nine months of 2019 (a decline of 22%) and US$46.9b in proceeds (a decline of 9%).
US exchanges accounted for the majority of IPOs in the Americas region, 79% by number of deals and 95% by proceeds YTD in 2019. This was driven by several high-profile technology unicorns that have gone public so far this year. The NASDAQ and NYSE ranked first and second respectively by proceeds globally in YTD 2019.
Muted Asia-Pacific IPO activity lifted by Shanghai’s STAR Market
In Asia-Pacific, YTD 2019 IPO volume was down 9% (436 IPOs) and proceeds decreased by 27% (US$46.1b) compared to the same period in 2018. The launch of Shanghai’s STAR Market offset more muted activities in Hong Kong, Japan and Australia in Q3 2019, with Asia-Pacific exchanges seeing a decline of 2% by deal volumes (173 IPOs) and 29% by proceeds (US$23.7b) in Q3 2019 compared to Q3 2018. However, ongoing trade tensions between China and the US continue to impact IPO activity across parts of the region.
However, Asia-Pacific continued to dominate global IPO activity in Q3 2019, representing seven of the top 10 exchanges by volumes and five of the top 10 exchanges by proceeds. Average first day returns for IPOs on Asia-Pacific’s main markets rose to 51%, while average current returns soared to 71%, predominantly because of Shanghai’s STAR Market activity.