The global IPO market has seen a “significant slowdown” in the 1Q2022, following the record-breaking figures in the global IPO market in 2021.
For the 1Q2022, the global IPO market saw 321 deals raising US$54.4 billion ($73.65 billion) in proceeds, representing a decrease of 37% and 51% y-o-y respectively.
According to professional services firm Ernst & Young (EY), the slowdown is due to volatile market conditions.
Despite the slowdown, 2022 began strongly with January producing the strongest opening month in 21 years by proceeds. However, by the second half of the quarter, the global stock market saw a sudden reversal due to the rise in geopolitical tensions, volatility in the stock markets, as well as price correction in over-valued stocks from recent IPOs.
In addition, the impact of inflation and potential interest rate hikes and the Covid-19 pandemic risk also contributed to the decline.
In line with the sharp decline in global IPO activity, there was also a considerable fall in cross-border, unicorn, as well as Spac IPOs and mega IPOs with proceeds above US$1 billion.
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There were also a number of IPO launches postponed due to market uncertainty and instability.
Paul Go, EY Global IPO leader said the decrease was “not unexpected” when compared with the 1Q2021 as the latter was the most active quarter in the last 21 years.
“However, the market shock from geopolitical tensions and other economic concerns in the second half of the quarter created volatility and impacted the capital markets. While markets continue to be volatile, and uncertainties on economic recovery remain for reasons including continuing concerns around Covid-19, there is a risk that IPO activity will continue to slow further with IPO candidates choosing to postpone their transactions,” he says.
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“Companies need to be well prepared to access the market when the window opens, likely for a shorter timeframe, and include a careful review of business models and preparation of alternative fund-raising plans,” Go adds.
In terms of sectors, the first quarter saw some slight shifts in terms of sector performance, attributable to the changing economic environment and market conditions.
This time, the technology and materials sectors led by the number of IPO deals with 58 each, raising US$9.9 billion and US$5.9 billion respectively.
Energy took the lead in proceeds during the quarter, with a total of US$12.2 billion raised through 15 IPOs. This was due to the first quarter’s largest IPO on the Korea Exchange.
“As many uncertainties remain, the market will remain volatile with a backlog of IPO candidates and pipelines will continue to build up. With the prevailing headwinds arising from geopolitical tensions and conflicts, inflation and interest rate hikes, it will be imperative for IPO-bound companies to take a fresh look at how these challenges will affect their markets, customers and suppliers to their business,” says Go.
Asia Pacific
Unlike the global IPO trend, the Asia-Pacific (APAC) region saw IPO proceeds increase 18% y-o-y in spite of a 16% y-o-y decline in the number of deals during the 1Q2022.
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The region saw a total of 188 IPOs raising US$42.7 billion in proceeds, surpassing that of 1Q2021’s figures, which had raised the highest proceeds for the first quarter of the year in 21 years.
During the period, four of the seven mega IPOs were listed in the APAC, including two of the quarter’s largest IPOs by proceeds.
Sector-wise, the industrial sector led by volume with a total of 40 IPOs raising US$3.3 billion, followed by materials with 37 IPOs raising US$5.3 billion. The energy sector led by proceeds with US$11.2 billion raised via eight IPOs, followed by telecommunications, which saw proceeds of US$8.5 billion via three IPOs.
Asean’s exchanges saw a 32% y-o-y growth in deal numbers, with 29 IPOs in the 1Q2022 from 21 the year before. However, proceeds in IPOs raised in the Asean region fell 57% y-o-y to US$1 billion from US$2.4 billion in the same period before.
According to EY, the most notable decline in proceeds was due to the lack of a mega IPO being posted in the 1Q2022, compared to one mega IPO the year before.
During the quarter, Indonesia’s IDX was most active by deal numbers with 12 IPOs raising US$219 million. Malaysia’s exchanges led by proceeds raising US$362 million via five IPOs.
Elsewhere, Thailand’s exchanges saw five IPOs raising US$228 million, while the Philippines Stock Exchange had four IPOs raising US$201 million. Singapore Exchange’s (SGX) Catalist board saw three IPOs raising US$17 million.
In the rest of Asia, greater China registered a 28% y-o-y decline in deals and a 2% y-o-y increase in proceeds. During the period, the region saw 97 deals raising US$30.1 billion.
Hong Kong’s IPO activity saw a visible slowdown on the back of market volatility. A severe outbreak of Omicron cases and a relatively bigger fall in the local stock market indices contributed to the lower figures.
Mainland China also registered a small decline in deal numbers, although it saw proceeds increase y-o-y as it hosted three out of the seven mega IPOs in 1Q2022.
After the largest number of IPOs seen in 2021, Japan’s IPO activity slowed in 1Q2022, with a number of small-cap IPOs coming to the market. The country saw 15 IPOs, which raised US$0.2 billion.
South Korea saw a total of 19 IPOs with total proceeds of US$11.2 billion, representing a 21% y-o-y decline and a 368% y-o-y increase respectively. The surge in proceeds raised was due to the Korea Exchange welcoming its largest-ever IPO raising US$10.7 billion.
IPO activity was slower in February in South Korea before its presidential election in March.
Max Loh, Singapore and Brunei managing partner at Ernst & Young LLP and EY Asean IPO leader, says: “Geopolitical tensions, the ongoing Covid-19 situation, supply chain woes, tightening of monetary policy and escalating costs are a few – but clearly significant – factors that are weighing down economic and IPO activity.”
“The IPO market remains receptive to quality high-growth companies, but volatility, uncertainty and valuation expectations will need to be tempered before a resurgence in IPO activity can happen,” he adds.
Americas
The Americas saw IPO deals decline 72% y-o-y to 37 IPOs, with proceeds plunging by 95% y-o-y to US$2.4 billion.
During the quarter, health and life sciences led the number of deals followed by the materials sector. A single large deal drove financials to lead by proceeds, while health and life sciences stood second in terms of proceeds.
According to EY, the pace of Spac IPOs and mergers slowed amid challenging market conditions.
Brazil’s IPO market also ground to a halt in 2022 as dozens of companies cancelled or postponed deals. Volatility in the Brazilian market is expected to continue with elevated inflation and interest rates, and a fragile fiscal position, coupled with upcoming elections and consequences from geopolitical tensions.
That said, the Americas is expected to see higher activity in the year as more than a quarter of the 600+ active Spacs expire later in 2022. Over 60% will expire in the 1H2023.
EMEIA
In Europe, the Middle East, India and Africa (EMEIA), the recent volatility in markets impacted the region’s equity markets and corporate activity.
Many of the IPO candidates in the region opted to postpone their IPOs until they’ve received clarity on the region’s economic outlook.
The EMEIA saw a total of 96 IPOs raising US$9.3 billion, representing a 38% and 68% y-o-y decline respectively.
During the 1Q2022, Europe accounted for 15% of the global IPO deals and 5% by proceeds. The continent saw a total of 47 deals with proceeds of US$2.7 billion.
In the UK, the slower pace of IPO activity was due to a dip in investor confidence from the 4Q2021 that carried into 2022. The country saw eight IPOs with total proceeds of US$113 million, representing a 60% and 99% y-o-y drop respectively.
