Press release

22 Jul 2022 Jakarta, ID

YTD 2022 saw a dramatic slowdown in global IPO activity from a record year in 2021

IPO momentum continued to slow from Q1 into Q2, resulting in a considerable decline in both deal numbers and proceeds. Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter. The dramatic slowdown in IPO activity in YTD 2022 after a record year in 2021 was experienced across most major markets.

Related topics IPO
  • Global IPO volumes fell 46%, with proceeds down by 58% 1H year-over-year
  • With global activity almost halved in YTD 2022, the Americas market recorded the biggest decline
  • Middle East and India were some of the rare bright spots amidst a bearish market
  • Indonesia to continue seeing IPO activity despite regional setbacks

JAKARTA, 13 JULY 2022. IPO momentum continued to slow from Q1 into Q2, resulting in a considerable decline in both deal numbers and proceeds. Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter. The dramatic slowdown in IPO activity in YTD 2022 after a record year in 2021 was experienced across most major markets.

For Q2 2022, the global IPO market saw 305 deals raising US$40.6b in proceeds, a decrease of 54% and 65%, respectively, year-over-year (YOY). YTD 2022, there were a total of 630 IPOs raising US$95.4b in proceeds, reflecting decreases of 46% and 58%, respectively, YOY.

The 10 largest IPOs by proceeds raised US$40b, with energy dominating three of the top four deals, replacing the technology sector as the top IPO fundraiser. The technology sector continued to lead by number, but the average IPO deal size came down from US$293m to US$137m, whereas energy has overtaken to lead by proceeds with the average deal size increasing from US$191m to US$680m YOY.

Special purpose acquisition company (SPAC) IPOs are significantly down in line with traditional IPO activity despite new markets joining. The SPAC market has been challenged this year as a result of broader market conditions, regulatory uncertainty, and increased redemptions.  A record number of existing SPACs are actively seeking targets with the majority of them facing potential expiration in the next year. However, market performance and regulatory clarity will likely drive future deal flow.

In line with the sharp decline in global IPO activity, there was a sizable fall in cross-border activity affected by geopolitical pressures and government policies on overseas listings. These and other findings were published in the EY Global IPO Trends Q2 2022.

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:

“Any initial momentum carried from a record IPO year of 2021 was quickly lost in the face of increasing market volatility from rising geopolitical tensions, unfavorable macroeconomic factors, weakening stock market/valuation, and disappointing post-IPO performance, which further deterred IPO investor sentiment. With tightening market liquidity, investors have become more selective and are refocusing on companies that demonstrate resilient business models and profitable growth, while embedding ESG (environmental, social and governance) as part of their core business values.”

Asia-Pacific IPO market was weakened in 2022 

The Asia-Pacific area finished the quarter with a 42% decline in proceeds and 37% decline in deals YOY. However, Asia-Pacific markets performed relatively better benefiting from the two largest global IPOs YTD. The region saw 181 IPOs raising US$23.3b in proceeds during Q2, and 367 IPOs raising US$66.0 in proceeds YTD 2022. In terms of sector activity YTD, materials led the way with 78 IPOs, closely followed by industrials with 77 IPOs. YTD, the Shenzhen Stock Exchange had the highest number of deals with 82, constituting 13% of global IPOs. Meanwhile, the Shanghai Stock Exchange had the highest proceeds with US$32.8b, making up 34% of global IPOs YTD.

YTD 2022, Greater China saw a YOY decline of 36% in deals (191) and a 16% fall in proceeds (US$51.2b). A convergence of factors (COVID-19 restrictions, geopolitical unrest, weakened stock market, economic uncertainty and rising interest rates) had negative impact on IPO activity in Hong Kong. With COVID-19 restrictions in Shanghai and Beijing lifting, along with the State Council’s 33 stabilization policies and measures, China’s economy is expected to rebound significantly in Q3 2022 and boost investor sentiment.

Japan saw 37 IPOs raise US$0.5b in total proceeds YTD, down 84% in proceeds and 31% in deals, YOY. Deteriorating investor sentiment is primarily driven by geopolitical conflicts, rising energy prices and depreciation of the Japanese yen. Tokyo Stock Exchange (TSE) has been restructured into three new market segments – Prime, Standard, and Growth – to boost investor sentiment and gain global market share.

YOY, Australia and New Zealand IPO activity witnessed a modest YTD decline in number of IPOs (3%). However, the decline in proceeds was substantial (76%). It can be attributed to several big IPOs being deferred to 2022 Q3/Q4. While fundraising activities have slowed down mostly due to poor investor sentiment, there have been some M&A activities, including demerger and IPO transactions for carved-out businesses.

YTD, Asean saw a total of 54 IPOs raising US$2.4b, down 2% in deal number and 55% in proceeds YOY. The notable decline in proceeds was due to a lack of mega IPOs (IPOs with proceeds equal to or greater than US$1b) in YTD 2022, compared to three mega IPOs in YTD 2021 that raised US$3.9b. Asean exchanges that were most active were Indonesia (22 IPOs raising US$1.3b), Thailand (13 IPOs raising US$0.3b), and Philippines (7 IPOs raising US$0.3b), followed by Malaysia (6 IPOs raising US$0.5b) and Singapore (6 IPOs raising US$33m).  

Ringo Choi, EY Asia-Pacific IPO Leader, says:

“A multitude of factors, from COVID-19 restrictions and war in Europe to rising inflation rates and US/China tensions, have weakened Asia-Pacific’s IPO market in the first half of 2022. But a series of positive economic developments and new government policies in China should result in renewed optimism and a revival in IPO activity across the Asia-Pacific region for the remainder of the year.”

Indonesia leads the Asean IPO despite the region's notable decline

The amount of fundraising activity in the Indonesian capital market has seen robust growth, supported by the sustainability of the overall economic recovery in 2022. While inflation has seen an increase throughout YTD 2022, Bank Indonesia has maintained its key policy interest rate – the seven-day reverse repurchase rate (BI7DRR) – at an all-time low of 3.5%.

Growth in service activity, high commodity export prices, and improvement in the overall investment outlook have contributed to the country’s economic growth. The government has also accelerated its spending to boost consumption and demand, supported by key fiscal measures to counter inflation.

In the same period, Indonesia’s capital market saw continued growth in terms of fundraising activity. The Indonesia Stock Exchange (IDX) had 22 deals with total proceeds of US$1.3 billion in Q2 2022, in comparison to Q2 2021 which had more deals (23) but significantly lower proceeds of US$0.5 billion.

Several shares from IPOs in Q2 2022, however, experienced a decline in price as an effect of the Fed’s rate hike. Now more than ever, a proven track record of growth and profitability presents an important consideration for investors given the current market dynamics.

Going forward in Q3/Q4 2022, IDX is still expected to see more IPOs with companies looking to go public and raise funds. This includes companies in the energy, transportation, logistics, tech and agriculture sector, amongst several others.

Sahala Situmorang, Lead Advisory - Strategy and Transactions Partner, PT Ernst & Young Indonesia, says:

“Several key sectors experienced high growth amidst the pandemic and are riding the momentum to see new levels of even higher growth. The outlook for IPOs remains positive given the strong pipeline of companies that are ready to access public markets in the coming quarters. Moreover, the sustainability of the overall economic recovery coupled with the increasing number of investors will further contribute to the growth of fundraising activity in the capital market”.

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 from the current uncertainties and market volatility 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.

-ends-

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About the data

 The data presented here is available on ey.com/ipo/trends. Q2 2022 (i.e., January–June) is based on completed IPOs from 1 January 2022 to 21 June and expected IPOs by the end of June 2022. Data as of close of business 21 June UK time. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase, SPAC Insider and EY unless otherwise noted. SPAC IPOs are excluded in all data included in this report, except where indicated.