The number of initial public offerings (IPO) in 2020 rose by 19% y-o-y to 1,363, while proceeds from the IPOs grew 29% y-o-y, according to the EY quarterly report, EY Global IPO Trends: Q4 2020.
The report, which was headed by EY Global IPO leader and Asia-Pacific EY private assurance leader Paul Go, noted that the IPO market was “more resilient” than expected in 2020.
“2020 was full of surprises. Market volatility in the first half of the year was higher than any time since the global financial crisis. But volatility quickly subsided, with the year ending on the back of some stellar IPO market performances,” says Go.
“Buoyant global IPO markets have demonstrated the resilience of equity markets despite the pandemic. Capital markets and IPOs allow high-growth companies to fund innovation, accelerate growth and make significant contributions to society,” he adds.
Going into 2021, Go believes that the “strong finish” of 2020 “provides good momentum for the IPO market” for this year.
Diving deeper into the reason why IPO investors have enjoyed a prosperous 2020 amid the Covid-19 pandemic, Go says the global IPO markets have benefitted from the large amounts of liquidity that was injected into the system by governments due to the pandemic.
“This resulted in record levels of IPO activity in some major markets, more than in the past 20 years. IPO models have also evolved to adapt to the new ways of doing business — virtual roadshows, direct listings, special-purpose acquisition company (SPAC) mergers, to name a few,” he says.
The Americas saw the biggest y-o-y increase in IPO volumes and proceeds. The region reported a 30% y-o-y increase in IPO numbers to 282 in 2020, while proceeds spiked 78% y-o-y to US$97.9 billion ($129.79 billion).
Europe, the Middle East and Africa (EMEIA) saw IPO volume increase by 7% y-o-y to 259 IPOs. In contrast, proceeds in the region, fell 43% y-o-y to US$33.9 billion.
In Asia-Pacific, IPO volumes rose 20% y-o-y to 822 IPOs. In 2020, the region saw a 45% y-o-y growth in proceeds to US$136.2 million, making this the highest number of proceeds recorded since 2010.
Industrials led the sectors with 181 IPOs raising US$20.8 billion in proceeds. Technology came in second with 180 IPOs and US$38.7 billion in proceeds. Materials rounded up the top three sectors with 95 IPOs raising US$7.4 billion.
Greater China accounted for three of the top five exchanges globally. The region also saw an acceleration in IPO volumes and proceeds at 536 IPOs raising US$119.1 billion in proceeds for the 4Q2020.
Exchanges in Asean recorded a “steady number of listings” q-o-q in 4Q2020 at 34 IPOs compared to 33 IPOs in 3Q2020.
Proceeds for the quarter rose about three times to US$3.3 billion from US$1.1 billion in 3Q2020 in Asean.
“This could signal the return of more medium-cap IPOs rather than just small-cap IPOs in 2021. In Q4 2020, exchanges in Thailand were most active with 19 IPOs, raising US$1.9 billion, followed by Malaysia (five IPOs raising US$407 million) and Indonesia (five IPOs raising US$25 million), Singapore (four IPOs raising US$510 million) and Philippines (one IPO raising US$522 million),” says EY.
2020 on the whole saw a steady increase in cross-border IPO volume accounting for 7.9% of global IPOs and 10% by proceeds, compared to 8% and 7.1% in 2019.
In the report, Go also noted that more retail investors are putting their money into the stock market thanks to today’s low-interest-rate environment and increased first-day returns from IPOs.
However, he warns that as share prices of many new economy and technology companies have “made significant advances in 2020”, investors should look out for “potential volatility ahead”.
“We could see investors selling shares as soon as they see signs of market uneasiness, in the hope of locking in their gains from 2020. This would add to any market correction,” he says.
