Global IPO proceeds sink 74% to US$13.1b in Q1 from year ago: EY

SINGAPORE - Ongoing geopolitical uncertainties dampened global IPO (initial public offering) activity in the first three months of this year, though a rebound is expected in the next quarter once the "fog of uncertainty" clears, according to a quarterly IPO trends report by Ernst & Young (EY).

For the first quarter, the number of global IPOs fell 41 per cent to 199 deals from a year ago, with proceeds raised plunging 74 per cent to US$13.1 billion (S$17.7 billion)

Despite the positive performance of main stock indices and a decrease in volatility in many markets, trade tensions continued to weigh on investor enthusiasm, EY said.

Nonetheless, technology, healthcare and industrials sectors were the most prolific producers of IPOs globally year to date (YTD) in 2019, accounting for 101, or 51 per cent of the global IPOs by deal numbers, and raising US$5.4 billion, representing 42 per cent of global proceeds. By proceeds, technology came in as the strongest sector with US$2.1 billion raised, or 16 per cent of global proceeds.

A lull in IPO activity spread across the Asia-Pacific region in Q1 2019 as global economic uncertainty prevailed, EY said.

Trade tensions between China and the US in particular weighed heavily on market sentiment, and the region saw a 24 per cent decline in deal numbers to 126, along with a 30 per cent fall in proceeds to US$8.4 billion versus Q1 2018.

However, the Asia-Pacific continued to dominate global IPO activity in Q1 2019, with 63 per cent of global IPOs, and 64 per cent by proceeds. The region also accounted for eight of the top 10 exchanges globally by deal number and six exchanges by proceeds.

Among the top 10 global exchanges, the Hong Kong Stock Exchange ranked first in both volume and proceeds, with 35 IPOs that raised US$2.68 billion.

"Mainland China saw 30 IPOs raising US$3.7 billion 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," EY noted.

Singapore had three IPOs that raised US$0.02 billion in the first quarter this year. Though the number of deals remained unchanged from a year ago, proceeds raised fell 95 per cent.

Meanwhile, Indonesia posted a 75 per cent rise in deal number to seven IPOs, with proceeds raised increasing about 3.5 times to US$0.08 billion.

Malaysia also saw seven IPOs representing a 17 per cent increase in deal number, with proceeds raised increasing 12 per cent to US$0.51 billion from a year earlier.

Separately, in the Americas region, IPO activity fell sharply with deal proceeds declining 83 per cent to US$3.3 billion, and deal numbers falling by 44 per cent to 31 IPOs, compared with Q1 2018.

That said, the Nasdaq ranked second among the top exchanges by proceeds globally in YTD 2019, raising US$2.5 billion or 19.1 per cent of global proceeds.

Jackie Kelley, EY Americas IPO markets leader, said: "It was a quiet quarter across the Americas, partly because of the US government shutdown, where the lion's share of Americas IPO activity occurs, and partly as a result of different geopolitical uncertainties affecting other markets. However, as the dust begins to settle following a quarter of uncertainties, we expect IPO activity to return to more normal levels in Q2 2019."

Similarly, Max Loh, managing partner for Asean and Singapore at EY LLP said: "Ongoing trade issues between the US and China continue to have an effect on IPO market sentiment across Asia-Pacific. Asean exchanges have similarly not been spared with only Indonesia and Malaysia outperforming, compared to Q1 2018. More stable equity markets across the region points to a recovery in IPO activity ahead. Post-IPO performance levels will be another key factor in determining the speed of recovery of IPO activity levels in 2019."

Looking ahead, EY noted that IPO activity is set to rebound in the second quarter this year.

Martin Steinbach, EY Global and EY EMEIA (Europe, the Middle East, India and Africa) IPO leader, 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 towards the second half of 2019."