IPO proceeds fall 74% globally in Q1 from year ago

Fewer deals as trade tensions hit investor sentiment, but rebound expected next quarter: EY report

Ongoing geopolitical uncertainties dampened global initial public offering (IPO) 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).

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

Nonetheless, technology, healthcare and industrial sectors were the most prolific producers of IPOs globally year to date this year, 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 in the first quarter of this year 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 compared with the first quarter of last year.

However, the Asia-Pacific continued to dominate global IPO activity in the first quarter of this year, 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 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$20 million in the first quarter of 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 rising about 3.5 times to US$80 million.

Malaysia also saw seven IPOs representing a 17 per cent increase in deal numbers, with proceeds raised increasing 12 per cent to US$510 million from a year earlier.

In the Americas, 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, from the first quarter of last year. That said, Nasdaq ranked second among top exchanges by proceeds globally in the 2019 year to date, raising US$2.5 billion or 19.1 per cent of global proceeds.

Said Mr Max Loh, managing partner for Asean and Singapore at EY: "More stable equity markets across the region points to a recovery in IPO activity ahead."

Mr Martin Steinbach, EY global and 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."

A version of this article appeared in the print edition of The Straits Times on March 26, 2019, with the headline 'IPO proceeds fall 74% globally in Q1 from year ago'. Subscribe