Institutional investor survey

IPO market in numbers

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Institutional investors are more confident about the initial public offering (IPO) market in 2013. 

A brighter corporate earnings outlook, stabilization in macroeconomic conditions and equity markets, as well as an increased appetite for risk, were cited as the key factors most likely to improve IPO market sentiment in 2013.

An EY survey of institutional investors found that the appetite for investment in IPOs has picked up over the past year. While the number of IPOs was low in 2012 compared with other years, 82% of institutional investors surveyed invested in IPO and pre-IPO stock in the past 12 months. 

Right team, right story, right price 

The survey results suggest that good quality companies, priced at the right level, run by the right team and with a good story to tell, will always command the attention of the market. 

Right price featured in 91% of investors’ top three critical success factors influencing IPO performance across all geographic regions and investor types. 

But investors are also looking for evidence that the business model has performed well in recent years, and that the business story shows there is a solid track record of growth and a future plan to sustain it. 

Timing is also an important factor. The window for successful offerings is constantly opening and closing, sometimes very quickly. Those businesses that are well prepared to go public will be able to launch in time when the opportunity arises.

Geographical focus 

The majority of investors are focused on domestic markets. This sentiment was particularly true of investors in North America, where 89% are focusing investment in domestic listings. 

European investors, on the other hand, are more inclined to support listings outside their home region, while very few Asian investors are actively looking at opportunities overseas. Only 9% of Central and South American investors look outside their home region. 

However, investors generally perceived rapid-growth markets as both more risky and more expensive. 

Sector appeal

Financial services is the industry with the highest appeal in every region. Investors are attracted to the sector due to the high demand for financial services globally and the fact that there is a high level of innovation within the sector. 

Consumer industries are also strong in fast-growth markets where populations are young and expanding and where incomes are rising.