The risks and uncertainties from geopolitical frictions and shifting trade policies have contributed to declines in global IPO activity in the second quarter of this year, resulting in a first-half total of 660 IPOs, down 21 percent on the first half of 2017.
Despite this slowdown, global IPO markets raised $94.3 bn in the first half of 2018, a 5 percent year-on-year increase and the highest proceeds for the first half of a year since the first half of 2015, according to the EY quarterly report, Global IPO trends: Q2 2018.
Dr Martin Steinbach, EY Global and EMEIA IPO leader, comments in a statement: ‘Global IPO figures for the first half of 2018 dipped by volume compared with the same period in 2017, despite higher valuations on some of the world’s largest markets. The good news is that economic conditions continue to be encouraging, equity valuations are high in many parts of the world and interest rates remain low.
‘As a result, we expect a resurgence in IPO activity during the second half of 2018.’
Americas IPO momentum
Looking at the data by geographical region, the Americas defied market volatility to have a strong first-half 2018, increasing proceeds by 31 percent to $35.3 bn and regaining the lead for proceeds among regions for the first time since 2014.
The NYSE and Nasdaq rank among the top three exchanges by proceeds globally in the first half of 2018, contributing heavily toward an 18 percent year-on-year increase in deal numbers since 2017.
This strong momentum is largely a result of good performance, especially in the US where IPOs posted average first-day returns above 10 percent and share price performance post-IPO exceeded broad equity indices.
US IPOs account for 83 percent of volume and 85 percent of proceeds on Americas exchanges in the first half of this year.
Jackie Kelley, EY Americas IPO markets leader, comments: ‘The second quarter of 2018 was marked by an influx of technology IPOs entering the US market. From 2013 to 2017, we saw healthcare companies dominate the markets in terms of deal count, but since then we’ve seen technology companies slowly gaining.
‘Deal count and proceeds raised are up compared with last year, and post-IPO share price performance is solid, creating momentum heading into the second half of the year.’
Investor appetite high in Asia-Pacific, despite drop in IPOs
While investor appetite for IPOs across the Asia-Pacific region remained high in the first half of 2018, volumes declined 37 percent while proceeds fell 17 percent compared with the first half of 2017.
But Asia-Pacific still accounts for a 46 percent share of global IPOs and 31 percent of global IPO proceeds in the first half of this year, and five of the 10 most active exchanges by deal numbers are from this region. In particular, Japan’s IPO market has continued to perform well in the second quarter of 2018 with 21 IPOs raising $1.5 bn – $1.3 bn of which was generated by 11 technology IPOs in the second quarter.
Overall, Q2 2018 saw sizable gains in both volume and proceeds, increasing 75 percent and 202 percent, respectively, over Q1 2018. The large increase in the second quarter means Japan finished the first half of 2018 with a 5 percent decline in volume and an 8 percent increase in proceeds compared with H1 2017.
China’s Shanghai exchange hosted Q2 2018’s largest IPO globally and is second among exchanges by proceeds.
Ringo Choi, EY Asia-Pacific IPO leader, says: ‘Strong macroeconomic fundamentals and investor appetite act as a counterbalance to the otherwise volatile performance of IPO activity across the region.
‘Following the general declines in IPO performance in the first six months of 2018, largely resulting from recent interest rate increases, global political and economic uncertainties, we expect to see a rebound in the deal size of the IPOs in the second half of the year as a number of mega-IPOs begin to hit the market.’
EMEIA benefits from European mega deals
In Europe, the Middle East, India and Africa (EMEIA), India is the top story. Its IPO market continued to thrive, having the second-most active exchanges by number of IPOs globally in Q2 2018.
More broadly, India’s H1 IPO activity in terms of number of deals and proceeds is 32 percent and 31 percent higher, respectively, than the first half of 2017.
Overall in EMEIA, ongoing geopolitical uncertainty and shifting trade policies have defined the first half of 2018 as a period of caution. Deal volumes during this period in EMEIA declined by 4 percent. But IPO pipelines and activity remain robust behind the scenes. Deal proceeds in EMEIA rose 10 percent in the first half of 2018 compared with the same period in 2017. Furthermore, H1 2018 was above the EMEIA 10-year median for deal numbers and proceeds.
Steinbach notes: ‘Rising geopolitical disruptions and trade tensions mean EMEIA’s agenda is not entirely its own. As an export-oriented region, EMEIA relies on stable relationships with its partners for trade.‘Despite strong economic fundamentals and a strong IPO pipeline, IPO activity levels may continue to lag until investors and issuers alike feel market conditions are more favorable.’
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