Despite positive performance of main stock indices and a decrease of volatility in many markets, ongoing geopolitical uncertainties and trade issues continue to dampen investor enthusiasm, resulting in the number of IPOs in the first three months of 2019 (YTD 2019) falling to 199 globally and US$13.1b in proceeds.
- Global IPO activity falls following ongoing geopolitical and trade uncertainty
- Technology, health care and industrials were the most active sectors in Q1 2019
- Rebounding IPO activity will bloom in Q2 2019 once fog of uncertainty has lifted
This is a 41% decrease in deals and a 74% decrease in proceeds from YTD 2018. The technology, health care and industrials sectors were the most prolific producers of IPOs globally in YTD 2019, together accounting for 101 IPOs (51% of global IPO by deal numbers) and raising US$5.4b altogether (42% of global proceeds). By proceeds, technology was the strongest sector with US$2.1b raised (16% of global proceeds). These and other findings were published today in the EY quarterly report, Global IPO trends: Q1 2019.
Global IPO trends: Q1 2019.
EMEIA IPO activity delayed with Brexit uncertainties
In EMEIA, deal volumes and proceeds were down substantially from Q1 2018 with EMEIA exchanges posting only 42 IPOs raising a total of US$1.4b in Q1 2019. However, although Q1 2019 was a remarkably slow quarter, those EMEIA IPOs that did come to the main markets experienced average first-day returns of 4% and current returns of around 46%, giving IPO investor sentiment a boost.
In Europe and the UK, the ongoing uncertainty around Brexit continued to plague IPO markets, and risk of slow growth in large European economies resulted in only 23 companies issuing IPOs, with proceeds of US$0.4b.
Cross-border IPO activity in Q1 2019 remained at 2018 levels, accounting for 9% of EMEIA companies’ IPO activity.
Looking ahead, overall, due to strong fundamentals and investor confidence, EMEIA IPO markets are expected to remain a dominant force globally in 2019.
Commenting on the findings of the report, Stelios Demetriou, Partner and Head of Transaction Advisory Services of EY Cyprus, said: “Ongoing geopolitical tensions, trade issues among the US, China and Europe, and, close to home, the risk of slower economic growth and growing uncertainty surrounding Brexit, have slowed down IPO activity in all regions. However, there are signs of a recovery in IPO activity in 2019, especially in Europe, where IPOs that did come to the markets registered high returns. In contrast to the above, the Cyprus Stock Exchange continues to face limited relevant activity, with IPOs not being utilized as a funding tool like in the case of other European markets and the market facing reduced liquidity. This inevitably limits the options available to local businesses with regards to raising equity capital.”
Americas IPO markets quiet with the US Government shutdown
Americas IPO activity fell sharply in YTD 2019, with deal proceeds decreasing 83% to US$3.3b and deal numbers falling by 44% to 31 IPOs, compared with Q1 2018.
The US accounted for 65% of Americas’ IPOs (20) and 92% by proceeds (US$3.0b). However, in the US, market volatility, on top of the fact that the US Government could not agree on an appropriations bill, resulting in the longest government shutdown in history, caused foreign issuers to choose to postpone their listings. Only four cross-border IPOs listed in the US in Q1 2019, in comparison with 15 companies in Q1 2018.
Asia-Pacific IPO market sentiment impacted by the trade tensions
A lull in IPO activity also spread across the Asia-Pacific region in Q1 2019 as global economic uncertainty and geopolitical issues prevailed. Ongoing trade tensions between China and the US in particular weighed heavily on market sentiment and the region saw a decline of 24% by deal numbers (126) and 30% by proceeds (US$8.4b) versus Q1 2018. However, Asia-Pacific continued to dominate global IPO activity in Q1 2019, with 63% of global IPOs and 64% by proceeds.