Overall regional performance: investors are refocusing on fundamentals
The Americas region completed 41 deals in Q2 2022, raising US$2.5b in proceeds, a decline of 73% in the number of deals and a 95% fall in proceeds YOY. The Asia-Pacific region recorded 181 IPOs, raising US$23.3b in proceeds in Q2, a decline YOY of 37% for volume and 42% in proceeds. EMEIA market IPO activity in Q2 2022 reported 83 deals and raised US$14.8b in proceeds, a YOY decline of 62% and 44%, respectively.
Given the tightened market liquidity and significant decline in stock prices of many new economy companies that went public during the last two years, investors are becoming more selective and are refocusing on the companies’ fundamentals instead of just “growth” stories and projections; e.g., sustainable profits and free cash flows.
Paul Go, EY Global IPO Leader, says:
“Investors are refocusing on companies with resilient business models and profitable growth, while embedding ESG in their core business values.”
Q3 2022 outlook: uncertainties and volatility are likely to remain
There were many mega IPOs postponed in the first half of 2022, which represent a healthy pipeline of deals that are likely to come to the market when the current uncertainties and volatility subside. However, strong headwinds are likely to remain. These include geopolitical strains, macroeconomic factors, weak capital market performance and the impact from the lingering pandemic on global travel and related sectors.
The technology sector is likely to continue as the leading sector in terms of the number of deals coming to the market. However, with greater focus on renewable sources of energy in the face of increasing oil prices, the energy sector is expected to continue to lead by proceeds from bigger deals.
ESG will continue to be a sector-agnostic key theme for investors and IPO candidates. As global climate change and energy supply constraints intensify, companies that have embedded ESG into their core business values and operations should attract more investors and higher valuation.