10 minute read 8 Oct 2020
Low angle boat sailing in the sea and cloudy sky islands

How geopolitical uncertainty and trade tensions plagued 2019 IPO landscape

By Paul Go

EY Global IPO Leader

Leads Chinese and multinational companies in client servicing domain. Heads Hong Kong real estate, hospitality and construction sector audit group.

10 minute read 8 Oct 2020
Related topics IPO Entrepreneurship

Our Q4 2019 trends report reveals that 2019 was a lackluster year for IPOs, but 2020 could be set to rebound.

Geopolitical uncertainty and trade tensions heavily impacted the 2019 IPO landscape, pushing overall IPO activity down in terms of both deals and proceeds. 2019 has registered 1,115 IPOs with proceeds of US$198b – a 19% fall in deal volume and a 4% decrease in proceeds compared to 2018.

However, as US-China-EU trade tensions, concerns about economic growth and other geopolitical issues – including Brexit and social unrest in Hong Kong – subside, a healthy increase in IPO activity is expected in 2020, particularly in the first half of the year.

IPO volume

1,095

The number of IPOs in 2019 - 21% fewer than in 2018.

Looking ahead, several uncertainties will subside in 2020. Trade tensions between the US, China and the EU; the outcome of Brexit; and uncertainty with respect to the stability of some European economies will fade in early 2020 and will positively impact overall IPO sentiment.

A healthy pipeline of IPO candidates means that within the right transaction window, IPO activity will pick up across all regions, particularly in the Americas where a number of large unicorns are expected to launch their IPOs in the US in the first half of 2020. This should see 2020 deal numbers and proceeds exceed 2019 levels.

Americas IPO activity falls amid geopolitical and trade uncertainty

With 213 IPOs raising US$53.9b, deal volumes and proceeds of Americas IPO markets in 2019 fell compared to 2018 numbers by 20% and 10%, respectively. The US remained in the spotlight as the leading source of IPOs in 2019, accounting for 77% of Americas IPOs and 93% by proceeds, including 24 unicorn IPOs.

Canada’s Toronto Stock Exchange and Venture Exchange saw 18 IPOs, which raised US$295m, accounting for 8% of Americas IPO deals. Brazil’s B3 exchange posted 5 IPOs over the year, with proceeds of US$2.3b, and Chile posted 2 IPOs, with total proceeds of US1.1b.

“Although the US has dominated IPO activity across the Americas in 2019, Brazil contributed more than US$2b in IPO proceeds to Americas totals during 2019, while Chile’s two real estate IPOs pushed their totals up,” says Jackie Kelley, EY Americas IPO Leader. By volume, Canada contributed with 17 small and mid-size IPOs, accounting for 8% of Americas deal numbers. As we look to 2020, we expect an active IPO environment across the region.”

As we look to 2020, we expect an active IPO environment across the Americas.
Jackie Kelley,
EY Americas IPO Leader

Asia-Pacific IPO markets remain resilient

Asia-Pacific continued to dominate global IPO activity, accounting for seven of the top ten exchanges globally by deal number and five of the top ten exchanges by proceeds in 2019. However, 2019 deal volumes (668 deals) were down by 1% versus 2018 and proceeds (US$89.9b) were down by 8% as geopolitical and trade tensions took their toll on global IPO activity.

Due to the early success of Shanghai’s STAR market, Mainland China saw an increase in IPO activity in Q4 2019, which pushed 2019 deals volumes past 2018 by 89% (197 deals) and proceeds by 69% (US$35.7b).

The Hong Kong Stock Exchange saw a 25% decline by deal number (154 IPOs), but a 4% increase by proceeds (US$37.9b).

Asia-Pacific continued to dominate global IPO activity, accounting for seven of the top ten exchanges globally by deal number and five of the top ten exchanges by proceeds in 2019.

Japan posted 86 IPOs in 2019, an 9% decrease in terms of volume compared to 2018, with proceeds of US$3.6 b representing an 7% drop compared to 2018 proceeds.

“Despite the geopolitical and trade uncertainty that prevailed throughout much of the year, Asia-Pacific markets performed reasonably well in 2019,” says Ringo Choi, EY Asia-Pacific IPO Leader. “However, as we move into 2020, we expect ongoing geopolitical headwinds and rising investor skepticism to slow IPO activity, particularly in the second half of the year.”

As we move into 2020, we expect ongoing geopolitical headwinds and rising investor skepticism in Asia-Pac to slow IPO activity, particularly in the second half of the year.
Ringo Choi,
EY Asia-Pacific IPO Leader

Guide to Going Public

Strategic considerations before, during and post-IPO

Read more

EMEIA IPO market buoyed by strong Q4 activity

In EMEIA, deal volumes (234) were down 47% in 2019 however proceeds (US$54.2b) were up 14% - the only region to see a rise in proceeds in 2019. EMEIA exchanges also remained strong, accounting for three of the top ten exchanges globally by proceeds in 2019 (Saudi Arabia, UK and Germany) and four of global top ten IPOs by proceeds.

EMEIA IPO proceeds picked up strongly in Q4 2019 due to four mega IPOs, including Saudi Aramco, with a rise of 174% by proceeds, but a decline of 45% by deal number compared with Q4 2018.

“EMEIA welcomed the largest-ever IPO with Saudi Aramco, which helped drive an increase of 14% in IPO proceeds for the year,” says Dr. Martin Steinbach, EY EMEIA IPO Leader. “As the disruptive headwinds that dampened IPO activity subside, we anticipate a positive impact on investors’ sentiment for IPOs and a modest upturn of IPO activity in EMEIA in 2020. Overall, we expect investors to be more selective in their choice of high-quality equity stories. In addition, the owners and C-suite of IPO bound companies continue to face volatile markets. The will need to prepare early and have a holistic approach to the IPO-ready in order to act quickly when narrow IPO windows open.”

As the disruptive headwinds that dampened IPO activity subside, we anticipate a positive impact on investors’ sentiment for IPOs and a modest upturn of IPO activity in EMEIA in 2020.
Dr. Martin Steinbach,
EY EMEIA IPO Leader

Summary

A healthy increase in IPO activity is expected in 2020, particularly in the first half of the year.

About this article

By Paul Go

EY Global IPO Leader

Leads Chinese and multinational companies in client servicing domain. Heads Hong Kong real estate, hospitality and construction sector audit group.

Related topics IPO Entrepreneurship