- Number of IPOs slumped worldwide towards the end of the first quarter
- Decrease compared to the same period a year earlier is 37 percent, issue volume shrinks by 51 percent
- First listing in the new Sparks SME segment on SIX and an IPO
- Swiss technology company with IPO on NASDAQ Stockholm in Sweden
EY’s current IPO Barometer in Switzerland shows: The war in Ukraine and heightened geopolitical tensions have significant implications for the global IPO market: After a very lively start to the year in January, the number of IPOs plummeted in February and March: A total of 321 companies worldwide went public in the first quarter – 37 percent fewer than in the same period a year earlier. The issue volume fell 51 percent to USD 54 billion.
This brought the uptrend of the previous quarters and the positive momentum from the record IPO year 2021 to an abrupt end. In January, global issuance had been at its highest level in 21 years at USD 32 billion, but in February it slumped from USD 36 billion to USD 10 billion, and in March as much as from USD 47 billion to USD 12 billion, as volatility doubled in the wake of the war and geopolitical tensions.
The sharpest decline was recorded in the USA: Compared with the first quarter of the previous year, the number of IPOs in the United States fell from 100 to 25, and the issue volume actually shrank by 94 percent from USD 42 billion to just over USD 2 billion. Hefty declines were also recorded in Europe: The number of IPOs almost halved from 89 to 47, and the issue volume fell from USD 26 billion to just under USD 3 billion.
The Chinese market recorded fewer declines: In China (including Hong Kong), 97 companies went public in the first quarter, 28 percent fewer than in the same period last year. The issue volume, on the other hand, rose slightly – by 2 percent – to USD 30 billion.
Consequences for Swiss IPOs
In the first quarter of this year, the first IPO in the new Sparks SME segment took place on the SIX Swiss Exchange: Xlife Sciences AG moved from the Munich stock exchange to SIX and is now listed in the new Sparks segment. According to SIX, Talenthouse AG will complete its IPO on the Swiss stock exchange on March 29. Smart Valor AG, a Zug-based technology company that operates an investment platform for digital assets, was another Swiss company to go public in the first quarter. However, this was not in Switzerland, but on NASDAQ Stockholm in Sweden. The company has a market value of USD 96 million. One Swiss company also went public in the first quarter of last year.
“The war in Ukraine and the massive increase in political and economic uncertainty meant that many companies postponed their stock market plans for the first quarter,” says Tobias Meyer, head of Transaction Accounting and IPO Services at EY Switzerland. “Volatility skyrocketed and doubled in the first quarter, while stock markets around the world saw large losses. In this environment, investors are very cautious, and it seemed prudent for many companies to wait for now and prepare for the next IPO window.”
Technology IPOs still preferred, but number down sharply
Globally, most IPOs in the first quarter were in the technology and commodities segments. In the technology segment, issue volume shrank from USD 48.1 billion to USD 9.9 billion, and the number of IPOs fell by 57 percent from 136 to 58. The trend in commodities was different: The number of IPOs climbed from 50 to 58, and the issue volume from USD 4.4 billion to USD 5.9 billion.
IPOs of industrial companies (down from 67 to 57 IPOs) and companies from the healthcare sector (down from 84 to 49 IPOs) ranked third and fourth, respectively.
According to Tobias Meyer, transformation processes that lead to increases in company value remain a key driver of the IPO market: “The trend of digitization of the economy affects many sectors and remains intact. Both must be financed: Transformation in established companies and growth in young disruptive companies.” In addition, the shift towards greater sustainability and an increasing importance of ESG criteria is fostering new business models and companies.
SPAC issues fall, competition rises, more indirect IPOs expected
Following the strongest SPAC issuance year to date in 2021, a total of 64 SPAC transactions were counted globally in the first quarter of the current year, down 79 percent from the same period a year earlier. The shell companies achieved a total issue volume of USD 10.7 billion, 89 percent less than in the same period a year earlier.
Of the 64 SPAC transactions in the current year, 52 were in the USA and four in Asia, while eight such issues were recorded in Europe. “The coffers of the current total of around 713 active SPACs are bulging with a good USD 166.5 billion – this opens up a promising alternative route for operating companies, particularly in volatile times, via a merger with a shell company – both in Europe and the USA.”
This is particularly interesting for companies in the technology, industrials and healthcare sectors, says Meyer. However, the clock has been ticking for the SPACs, which were designed for a 24-month period. He anticipates increasing competition among SPACs and further mergers with German companies. The number of indirect IPOs will probably continue to rise this year.
Korean battery manufacturer LG Energy Solution largest IPO
The world’s largest IPO of the year to date took place in South Korea: Battery maker LG Energy Solution raised USD 10.7 billion in January. Chinese mobile operator China Mobile raised USD 8.2 billion in its IPO, which also took place in January. With an issue volume of USD 1.6 billion, the IPO of the Chinese solar module manufacturer Jinko Solar followed a long way behind.
Outlook strongly dependent on the situation in Ukraine
Tobias Meyer says: “The global pipeline of stock market candidates remains well filled. In the current situation, however, many companies are waiting and using the time to prepare well for the IPO. Therefore, the second half of 2022 could also become significantly more active again.” However, the decisive factors for the timing and number of IPOs are a calming of the current geopolitical tensions, the resolution of uncertainties from an investor perspective, and a decline in volatility.
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