The Asia-Pacific region dominated a hesitant IPO market in the first quarter of 2023 as a growing number of companies waited in the wings for their chance to go public.
The first three months of the year recorded 299 IPOs globally, raising a total of $21 bn, according to data from EY. Those figures are down 8 percent and 61 percent, respectively, on the same period last year.
‘Despite this ongoing uncertainty around the economic and geopolitical environment, the IPO pipeline continues to build up and hope remains for a turnaround later this year,’ writes EY in its review of Q1.
During the quarter, Asia-Pacific accounted for 59 percent of global deal volume and also 59 percent of value, finds the report. But the region saw activity fall 6 percent and proceeds drop 70 percent compared with Q1 2022.
The EMEIA region, which comprises Europe, the Middle East, India and Africa, saw 84 IPOs during the first quarter, raising $6.2 bn, says EY. Those figures are down 19 percent for volume and 36 percent for proceeds compared with last year.
On the positive side, EMEIA delivered the only mega-IPO of the quarter: the $2.5 bn listing of ADNOC Gas on the Abu Dhabi Securities Exchange. The shares are up more than 25 percent since the March 13 IPO.
In the Americas region, the first quarter witnessed 40 deals and $2.6 bn in proceeds, which EY says was ‘in line’ with activity last year but ‘well below the levels seen in comparable periods over the last decade.’
Martin Steinbach, IPO leader for EMEIA at EY, says there have been some positive signs this quarter, such as lowering volatility – at least until the banking crisis erupted – and rising equity markets.
What factors will bring the IPO market back to life? Steinbach says a mix of high inflation, rising interest rates and geopolitical issues are currently ‘battering the market’.
‘In this environment investors are more selective and requesting more sustainable, profitable and high-quality equity stories for candidates in the pipeline,’ he explains. ‘If the headwinds impacting the market subside, we expect a rebound in IPO activity in H2. We see a robust pipeline sitting on the sidelines, waiting for the next open IPO window.’
While equity markets got off to a bright start in 2023, optimism has faded lately, putting a lid on hopes for a bounce-back in listings. IPO watchers predict a revival later in the year, however, with China alone boasting nearly 1,000 firms in its IPO pipeline.
‘IPO activity in the first quarter has been relatively slow compared with prior years, which, to a large extent, seems to be a continuation of the profoundly difficult year we had in 2022 when geopolitical uncertainties, interest rate hikes and other negative factors severely impacted the global IPO market,’ says Louis Lau, partner in capital markets at KPMG China.
‘Barring the occurrence of any major geopolitical events or further adverse change in the banking landscape, we expect an improvement in overall IPO sentiment as a number of such negative factors continue to diminish or become resolved in 2023, allowing dissuaded applicants to rejoin the IPO market and help global [listings] regain momentum.’
China, the bright spot amid last year’s listing drought, is set to sparkle again, adds Lau: ‘For 2023, we expect improvements in the economy of mainland China as a result of the relaxation of lockdown measures now that the impact of Covid-19 has alleviated, which should encourage more companies to consider expanding their businesses through an IPO.
‘In addition, the full implementation of the registration-based IPO system across all mainland China stock markets should be a welcome sign for all IPO applicants looking to list. Such factors, alongside a healthy pipeline of companies already planning to list, will likely help the Shanghai Stock Exchange and Shenzhen Stock Exchange continue to be top listing venues this year.’
At the end of March, there were around 800 companies in the A-share pipeline, says Lau, with more than half ‘of such applications being for the STAR Market and ChiNext board, which are focused on high-tech and emerging growth industries.’