Despite a decrease of volatility in many markets and positive performance of main stock indices, ongoing geopolitical tensions, US-China trade issues and the uncertainty created by Brexit continue to dampen investor enthusiasm, resulting in the number of IPOs in the first three months of 2019 (YTD 2019) falling to 199 globally and US$13.1b in proceeds, according to EY quarterly report, titled Global IPO trends: Q1 2019.
This is a 41% decrease in deals and a 74% decrease in proceeds from YTD 2018. Technology, healthcare and industrials were the most active sectors in the first quarter of 2019, collectively accounting for 101 IPOs (51 percent of global IPO by deal numbers) and raising $5.4 billion (42 percent of global proceeds). By proceeds, technology was the strongest sector with $2.1 billion raised (16 percent of global proceeds), the report said.
“While Q1 is usually a quiet IPO quarter across regions, in 2019 we’ve seen IPO markets sent into a cautious wait-and-see mode as a number of factors collide. The dense fog of ongoing geopolitical tensions, trade issues among the US, China and Europe, as well as uncertainty as to how the UK will leave the European Union, slowed down IPO activity in all regions. As we look to Q2 2019, we only need a successful mega IPO or unicorn from the robust IPO pipeline for the fog of uncertainty to clear and global IPO markets to spring into bloom toward the second half of 2019” Dr. Martin Steinbach, EY Global and EY EMEIA IPO Leader, said.
Americas IPO markets quiet with the US Government shutdown
Americas IPO activity fell sharply in YTD 2019, with deal proceeds decreasing 83% to US$3.3b and deal numbers falling by 44% to 31 IPOs, compared with Q1 2018.
The US accounted for 65% of Americas’ IPOs (20) and 92% by proceeds (US$3.0b). However, in the US, market volatility caused foreign issuers to choose to postpone their listings. Only four cross-border IPOs listed in the US in Q1 2019, in comparison with 15 companies in Q1 2018.
Asia-Pacific IPO market sentiment impacted by the trade tensions
A lull in IPO activity also spread across the Asia-Pacific region in Q1 2019 as global economic uncertainty and geopolitical issues prevailed. Ongoing trade tensions between China and the US in particular weighed heavily on market sentiment and the region saw a decline of 24% by deal numbers (126) and 30% by proceeds (US$8.4b) versus Q1 2018.
(Graphic Source: EY)
However, Asia-Pacific continued to dominate global IPO activity in Q1 2019, with 63% of global IPOs and 64% by proceeds. This region accounted for eight of the top 10 exchanges globally by deal number and six exchanges by proceeds. The Hong Kong Stock Exchange ranked first by both volume and proceeds respectively, among the top 10 global exchanges.
Mainland China saw 30 IPOs raising US$3.7b in Q1 2019. Although these numbers are lower when compared with Q1 2018, they are notably up from Q4 2018, suggesting the Mainland China IPO market may be showing signs of a recovery.
Japan continued to demonstrate strength in its IPO markets with Q1 2019 numbers exceeding those from Q1 2018 (23 IPOs in Q1 2019 versus 18 IPOs in Q1 2018).
EMEIA IPO activity delayed with Brexit uncertainties
In EMEIA, deal volumes and proceeds were down substantially from Q1 2018 with EMEIA exchanges posting only 42 IPOs raising a total of US$1.4b in Q1 2019. However, although Q1 2019 was a remarkably slow quarter, those EMEIA IPOs that did come to the main markets experienced average first-day returns of 4% and current returns of around 46%, giving IPO investor sentiment a boost.
In Europe and the UK, the ongoing uncertainty around Brexit continued to plague IPO markets, and risk of slow growth in large European economies resulted in only 23 companies issuing IPOs, with proceeds of US$0.4b.
Cross-border IPO activity in Q1 2019 remained at 2018 levels, accounting for 9% of EMEIA companies’ IPO activity, EY found.