The global initial public offering (IPO) market saw a total of 430 deals raising some US$105.6 billion ($141.15 billion) in proceeds, up by 85% and 271% y-o-y respectively.
The heightened activity, which is attributable to attractive market conditions so far in 2021, has led to the best-performing first quarter in terms of deal numbers and proceeds in the last 20 years, according to the EY quarterly report, Global IPO Trends: Q1 2021.
To be sure, the record figures have bucked the trend for the first quarter, which is traditionally a slow period.
It’s not just traditional IPO markets that have been active during the 1Q2021.
Special purpose acquisition company (SPAC) IPOs in the same period have also seen record figures. During the quarter, more deals and more proceeds were raised compared to the whole of 2020.
The continued surge in momentum, according to EY, may be due to ample liquidity and new opportunities brought about by the Covid-19 pandemic.
At the same time, speculative and opportunistic transactions, as well as the popularization of retail investing platforms among the general public have made investing more accessible.
That said, investor sentiment remains fragile with fears that a market correction may take place soon.
With this, investors will continue to look for investment returns taking advantage of liquidity, while it is still available, reads the statement dated April 15.
IPOs in the Americas
In 1Q2021, the Americas saw a total of 121 IPO deals raising US$45.2 billion in proceeds, increasing 218% y-o-y and an unprecedented 446% y-o-y respectively. Overall, exchanges in the Americas saw the highest combined deal numbers and proceeds in over 20 years.
According to the report, the 1Q2021 saw deals being carried over from 2020 with issuers taking advantage of high valuations led by technology companies, which saw 99 IPOs raising US$41.4 billion in the US.
SPAC IPO activity continued in the 1Q2021, with three times as many SPAC IPOs on US exchanges than traditional IPOs, even as the number of deals in the latter skyrocketed.
The US saw a total of 300 SPAC IPOs raise US$93.4 billion in proceeds in 1Q2021.
Brazil’s IPO activity also continue to surge during the quarter, making it the country’s most active quarter since 2007. The country represented 12% of the region’s total IPO count with 15 IPOs raising US$3.5 billion.
“Americas IPO activity maintained its resiliency into 2021, driven by high valuations and strong aftermarket performances. Despite the volume of SPACs and the attention they are receiving, traditional IPOs have staying power with Q1 2021 deal numbers and proceeds being the highest in more than 20 years,” says Rachel Gerring, EY Americas IPO leader.
“Continued innovation in the traditional IPO product is allowing a healthy competition with non-traditional approaches to public markets. Ongoing evolution provides issuers more optionality and the ability to form a curated path to public markets,” she adds.
IPOs in the Asia-Pacific region
The Asia-Pacific region, which accounted for nearly half – or 47% -- of the global IPO activities, saw the highest IPO proceeds in 20 years, with 200 IPOs raising US$34.3 billion in proceeds.
The positive economic growth in Greater China was reflected in its buoyant IPO momentum, with 51% y-o-y higher IPO deals at 133, and a 121% y-o-y surge in proceeds of US$28.9 billion.
Japan’s IPO activity remained steady at 20 IPOs raising US$1.0 billion in proceeds.
Asean saw a total of 23 IPOs raising US$2.4 billion, lower from the 32 listings raising US$3 billion in the 1Q2020.
Thailand’s exchanges raised US$1.6 billion from five IPOs, while Indonesia led the number of IPO deals at 12. Singapore only had one IPO listed in the 1Q2021.
According to Max Loh, EY Asean IPO leader, “The first quarter is a typically muted period for IPOs in Asean, as companies gear up for capital market activities.”
“Cautious optimism prevails with existing uncertainties, providing a cocktail of volatility in the Asia-Pacific IPO markets. Companies will need to be resilient to challenges and prepare early to be successful in their IPO aspirations,” he says.
SEE:Deliveroo launches London IPO after business surges in 2020
IPOs in EMEIA
IPO markets in Europe, the Middle East, India and Africa (EMEIA) saw 109 IPOs raising US$26.1 billion in proceeds after a quiet 2020.
European IPO activity remained resilient with increased deal numbers by 315% y-o-y at 83 and 1,814% y-o-y higher proceeds at US$23.1 billion.
The UK closed the quarter with 17 IPOs raising US$7.5 billion in proceeds, up 467% y-o-y and 1,031% y-o-y respectively.
“High valuations, low volatility and increasing optimism of an economic rebound have sustained IPO activity in 1Q2021 and motivated several unicorns to leap through the open transaction window,” says Dr Martin Steinbach, EY EMEIA IPO leader.
“We expect this momentum will carry into 2Q2021. With tailwind from government stimulus and a successful rollout of vaccines across the region, there is growing confidence in a global economic rebound in 2021 and 2022.”
“However, a third wave of the Covid-19 pandemic and a possible market correction may influence IPO windows for the remainder of the year. IPO candidates need to prepare early and keep all options open,” he adds.
IPOs by sectors
The technology sector remained in the top spot by deal numbers in 1Q2021 with 111 IPOs and US$46.1 billion in proceeds.
Healthcare came in next with 78 IPOs raising US$14 billion.
Industrials were the third, with 57 deals and US$6.3 billion in proceeds.
“With markets awash with liquidity, global IPO deal numbers and proceeds have posted the best performance witnessed in 20 years. However, many uncertainties remain that can create volatility and affect the IPO markets,” writes Paul Go, EY Global IPO leader.
“These include slower-than-expected vaccination programs and new waves of the pandemic that can continue to peg back any real economic recovery; the slow-down and withdrawal of IPO applications due to tightened regulatory process; and risk of capital markets destabilizing from banks scaling back on leverage. Companies need to be well prepared to access the market when the window remains open,” Go adds.
Looking ahead, despite positive trending sentiments, EY cautions that uncertainties may lead to market volatility.
“The likelihood of new waves of the COVID-19 pandemic around the world combined with differing global vaccination progress, geopolitical tensions, inflation, interest rates and the ability of the global financial systems to withstand unexpected market shocks are all potential ingredients for a perfect storm,” reads the statement.
“Whether a company decides to take the route of a traditional IPO, SPAC merger or a direct listing, well-prepared companies in popular sectors and with the right stories should move now to catch the transaction window while it’s still open,” it adds.
