The global IPO market has broken records by IPO volume and proceeds consistently into the fourth quarter, which, according to professional services firm, EY, is making 2021 the most active year for IPO in the past two decades.
“Initial optimism from rebounding economies, COVID-19 vaccine rollouts, and rolling liquidity from government stimulus programs provided strong tailwinds,” says Paul Go, EY Global IPO Leader.
However, it wasn’t a full-ahead press for IPOs. Go notes that in Q4 2021, continuing geopolitical tensions, the appearance of the omicron virus variant, has increased market volatility, and by extension, whether or not the listings will be launched as planned.
“Whether or not IPO-bound companies press pause or forge ahead in 2022, they will need to satisfy investor demands for resilient growth strategies and well-articulated environmental, social and governance (ESG) plans,” he adds.
Overall, 2021 saw a total of 2,388 deals raising US$453.3b in proceeds, a 64% and 67% respective increase y-o-y.
Q4 2021 was the most active fourth quarter by deal numbers since Q4 2007, seeing a 16% (621) and 9% (US$112.2 billion) increase by both total IPOs and by proceeds respectively, compared to Q4 2020.
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All global markets experienced overall increases by both IPO volume and proceeds, but Europe, the Middle East, India and Africa (EMEIA) exchanges produced the highest growth, seeing a 158% increase by number of IPOs (724) and a 214% increase by proceeds (US$109.4 billion).
The Americas remained hot as well, ending the year with 528 IPOs raising US$174.6 billion by proceeds, an 87% and 78% increase respectively.
The Asia-Pacific region, meanwhile, experienced relatively modest growth, with the 1,136 IPOs an increase of 28%, and with total proceeds of US$169.3 billion, an increase of 22%.
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Asia-Pacific sees modest gains in 2021
IPO activity in the Asia-Pacific region maintained a steady pace through 2021 with deal numbers (1,136) and proceeds (US$169.3 billion) rising 28% and 22% respectively y-o-y.
While these gains are impressive, they are modest relative to the record-setting IPO activity that the Americas and EMEIA experienced this year. The most active sector for IPOs was, unsurprisingly, technology, with 257 deals and total proceeds of US$45.4 billion raised.
Max Loh, EY Asean IPO Leader and Singapore and Brunei Managing Partner, Ernst & Young LLP, observes that IPOs in this region grew, but at a more modest level.
“In Greater China, IPO candidates had to grapple with new cross-border regulations, tightened guidelines and more volatile post-IPO market performances, which somewhat affected IPO activities,” he explains.
For Asean as a whole, there were 132 deals with a total of US$13.1 billion raised, up from 111 deals last year with US$77 billion raised.
“Amid ongoing challenges, Asean economies continued to show promise with vibrant entrepreneurial, start-up and private equity ecosystems. This bodes well for IPO activity, as invariably, growing companies will continue to tap the capital markets to fuel development and expansion,” says Loh.
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“Like other markets, long-term value and sustainability considerations will feature more prominently for IPO candidates going forward,” he adds.
Optimism, liquidity and COVID-19 vaccines drive a banner year for the Americas
The US IPO market remains red hot with 2021 overall on track to be the most active in the 21-year history of this report, with 416 IPOs raising US$155.7 billion by proceeds, representing an 86% and 81% y-o-y increase.
US special purpose acquisition company (SPAC) IPOs claimed fame in 2021, with US exchanges seeing more SPACs than traditional IPOs. SPACs have also shown remarkable resilience, and the US will likely continue to dominate the SPAC space, according to EY.
Rachel Gerring, EY Americas IPO Leader, says, “2021 was a record-setting year for the Americas IPO market. The surge in new public companies was driven by high valuations, an extended low interest rate environment and strong investor appetite for equities.”
“As we head into 2022, there is cautious optimism that the equity market will remain healthy for new issuers to come to market. Companies looking to go public should continuously consider all options.
“While a traditional IPO is the most tested form of achieving a public listing, alternative structures are evolving and giving companies more routes to gain access to public markets,” says Gerring.
Q1 2022 outlook: prepare for headwinds but capitalize on high valuations for now
For the coming Q12022, EY sees both headwinds and tailwinds for IPOs.
Geopolitics, inflationary risks and new waves and variants of the virus are risks hampering full economic recovery. Yet, relatively high valuations and market liquidity are for now keeping the IPO window open in 2022.
“IPO candidates can expect higher market volatility and should therefore remain flexible with a plan B in place to meet financing needs in case the IPO timetable is delayed,” according to the report.
Go says: “While the positive momentum of 2021 is expected to carry into 2022, it will be imperative for IPO-bound companies to adopt a resilient and flexible strategy that is able to adapt to shifting market conditions, evolving regulations and geopolitical tensions.”
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