Global IPO market shows signs of slowdown in 2Q

KUCHING: The trend of unicorn IPOs coming to market and pushing their proceeds to historic levels continued in the second quarter of 2019 ( 2Q19) despite ongoing geopolitical uncertainty and trade tensions, resulting in 507 IPOs in the first half of 2019 (1H19), raising total proceeds of US$71.9 billion.

While deal numbers were down 28 per cent from 1H18, firstday returns on the main markets were up 15.4 per cent on average and post-IPO performance increased 28.4 per cent.

Technology, health care and industrials saw the largest share of IPOs in 1H19, together accounting for 266 IPOs (52 per cent of global IPOs by deal numbers) and raising US$47.8 billion altogether (66 per cent of global proceeds).

By proceeds, technology was the strongest sector with US$29.3 billion raised (41 per cent of global proceeds).

These and other findings were published recently in the EY quarterly report, Global IPO trends: 2Q19.

EY Global and EY EMEIA IPO Leader Dr Martin Steinbach said following the trend of increased unicorn IPO activity, 2Q19 welcomed a number of much-anticipated, high-profile unicorns.

“The global IPO activity slowdown continued following an unusually quiet 1Q19 as ongoing geopolitical tensions, trade issues among the US, China and the EU, Brexit and the outcome of European elections dampened IPO sentiment.

“The main way for issuers to navigate the shift from old to new realities in unpredictable markets is to remain flexible.

“So well-prepared companies, with the right equity story, will find their windows of opportunity. We expect higher IPO activity in the second half of 2019.” Ongoing trade tensions between China and the US continued to impact IPO activity in YTD 2019, inhibiting a return to 2018 levels.

IPO activity across the AsiaPacific region in YTD 2019 was down 12 per cent by volume (266 IPOs) and 27 per cent by proceeds (US$22.3 billion), compared with YTD 2018.

However, Asia-Pacific continued to dominate global IPO activity YTD 2019, by volumes, representing six of the top ten exchanges.

By proceeds, the region accounted for three of the top ten exchanges.

Asia-Pacific’s main markets experienced average first-day returns of around 19 per cent and average current returns of 34 per cent, illustrating that IPO performance continues to elevate IPO investor sentiment.

Asean exchanges saw a total of 48 IPOs, raising US$2 billion in proceeds in YTD 2019, posting a slight decline (8 per cent) in deal volume, with proceeds notably lower ( a 55 per cent decline), compared to 1H18.

During the period, Indonesia Stock Exchange (IDX) saw the highest deal numbers, accounting for 35 per cent of deal volume and 10 per cent by proceeds in the region, while the Singapore Exchange (SGX) led by proceeds; its main and junior markets together accounted for 61 per cent of Asean proceeds and 17 per cent by deal number.

In 2Q19, Asean saw a notable increase in deal numbers (29 IPOs, a 53 per cent rise) over 1Q19 and a significant boost in proceeds, suggesting some signs of market recovery.

The SGX ranked 10th among global exchanges by proceeds for 2Q19 due to two sizeable real estate investment trust IPOs.

Max Loh, EY Asean and Singapore Managing Partner, Ernst & Young LLP says: “Economic uncertainty and ongoing trade issues continued to cast a shadow over IPO markets across the Asean region.

“Entrepreneurial companies accounted for the majority of IPOs that launched in the first half of 2019.

The notable increase in smallcap listings consolidates the view that there is still a general propensity for entrepreneurial companies to go public.

“As geopolitical volatility subsides and as average postIPO performance stabilises, we expect Asean IPO sentiment to commensurately improve.”