Global IPO Market Went From Record-Breaking to Full-on Abating

• In 2022, global IPO volumes fell 45%, with proceeds down by 61% YOY
• Compared to pre-pandemic times, the number of deals went up 16%
• Asia-Pacific accounted for 67% of global IPO proceeds
• Indonesia closed the year with an overall respectable performance, hopeful to see more IPOs in the first half of 2023

JAKARTA, 12 JANUARY 2023 – After a record-breaking 2021, the global IPO market took a sharp turn in the opposite direction in 2022. With only 1,333 IPOs raising US$179.5b, IPO activity dipped 45% and 61% by number of deals and proceeds, respectively, year-over-year (YOY). As the average deal size shrank due to lowered valuation and poor stock market performance, bourses around the world saw fewer large IPOs launched in 2022. These and other findings were published today in the EY Global IPO Trends 2022.

Throughout 2022, global IPO activity was impacted by increased market volatility and other unfavorable market conditions, along with the dismal performance of many IPOs that had been listed since 2021. Amid an environment defined by higher inflation and rising interest rates, investors have spurned new public companies and turned to less risky asset classes. Similarly, financial-sponsored IPO activity took a steep fall of 77% and 93% by number and proceeds, respectively. Most special purpose acquisition companies (SPACs) listed from late 2020 are also reaching their two-year window, and must now either find a target to merge or return the IPO proceeds to their investors. While these numbers represent a stark decline from 2021, global IPO deals still turned up a 16% increase by number when compared to pre-pandemic 2019.

Although market activity was mostly down across the board, there were a few select industries and regions that did achieve modest success. The technology sector continued to lead by volume accounting for 23% of deals, while the energy sector dominated by proceeds, accounting for 22% in 2022. Among listed mega IPOs, which are defined as those that raised proceeds of more than US$1b, the average proceeds in 2022 are 45% higher than those in 2021, on the back of strong valuation for the mega energy IPOs that took place this year.  Certain markets such as Mainland China, Middle East and some Southeast Asian countries have performed relatively well despite the significant global underperformance.

Overall regional performance: Waiting for a comeback in 2023 and more favorable market conditions to return

The Americas’ IPO activity sank to lows not seen since the peak of the great recession. It hit a 13-year low by volume and a 20-year low by value as markets were affected by volatility and policies undertaken to combat inflation. Both the number of IPOs and proceeds took a nosedive, with 130 deals raising US$9b, down 76% and 95%, respectively, YOY. Not surprisingly, most of the Americas’ IPOs (69%) were on US exchanges.

The Asia-Pacific IPO market had 845 IPOs totaling US$120.6b in proceeds, taking the smallest hit from the global economic downturn and geopolitical tensions, and accounting for 63% of deals and 67% of funds raised globally in 2022. Mainland China is on course to set another record in the highest annual capital raising by the close of 2022.

In Southeast Asia, there were a total of 137 IPOs raising US$6.5b in 2022, compared to 134 IPOs raising US$13.2b in 2021. Leading in performance were Indonesia (60 IPOs raising US$2.2b), Thailand (32 IPOs raising US$3.1b) and Malaysia (29 IPOs raising US$0.7b), followed by Philippines (8 IPOs raising US$0.5b) and Singapore (8 IPOs raising US$40m). Notably, the number of larger listings on Southeast Asia exchanges were limited in 2022, but with reduced COVID-19 restrictions, a return of larger IPOs in 2023 could be expected.

EMEIA IPO activity fell by 53% and 55% by number and proceeds, respectively, recording 358 IPOs raising US$49.9b. Even though Europe IPO activity was down 78% due to geopolitical turmoil, MENA was up 115% by proceeds as it benefited from the large energy and other IPOs completed, coupled with the initiative rolled out by the government’s privatization plan. EMEIA also delivered 5 of the top 10 IPOs this year.

Indonesia closes the year with an overall respectable performance, hopeful to see more IPOs in the first half of 2023

Now that most of the COVID-related restrictions have been lifted, investors are asking whether the number and size of IPOs will be returning to pre-COVID levels, but the reality is that Indonesia actually witnessed its best IPO year in terms of total proceeds in 2021, when 54 companies raised a combined total of US$4.7 billion. In 2022, while the figure dropped to US$2.2 billion, it was still the second largest proceeds generated through IPOs in all of Southeast Asia, with only Thailand managing to generate more IPO proceeds (US$ 3.1 billion). In terms of the number of IPO, Indonesia topped the list in Southeast Asia with 60 IPOs in 2022.

In Q4 2022, Indonesia started slowly with only 1 IPO in October. However, an additional 10 listings came in November, which generated 30% of the total IPO proceeds of 2022 – largely due to the US$510 million IPO of Indonesian e-commerce giant, BliBli. This was followed by five listings in December, bringing the Q4 IPO count to 16 listings by the close of the year.

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

“As has been the case in recent years, we expect the number of IPOs to be around 50-60 listings in 2023, led by the planned listings of several state-owned companies, and companies that are planning to seize the fund-raising window in the first half of 2023, prior to the presidential election in 2024. Some companies might take a wait-and-see approach until after the election and the formation of the new administration.”

Meanwhile, the creation of a new listing board called the New Economy Board should encourage more tech-based companies to consider an IPO, despite the funding winter for start-ups. Overall, it will be interesting to see how the global economy headwinds will affect local listings over the course of 2023.

2023 outlook: Waiting for the right window while focusing on fundamentals and ESG
Looking ahead to 2023, there is a strong IPO pipeline on the horizon. Even though IPO activity will likely remain somber through at least the first quarter, favorable conditions seem to be set in place for global IPO activities to regain greater momentum by the second half of the year. For the IPO market to become more active again, there are a number of prerequisite conditions: positive sentiment and an uptick in stock market performance; lower inflation and ending of the interest rate hikes; easing of geopolitical tensions; and diminished pandemic effects on the global economy.

Many prospective IPO companies are still going to take a “wait-and-see" approach, holding out for the right window. For now, investors will focus more on a company’s fundamentals, such as revenue growth, profitability and cash flows, over mere growth projections.

As there is a positive correlation between companies’ post-IPO share price performance and the communication of their environmental, social and governance (ESG) strategies, investors will also increasingly be looking at the company’s ESG agenda.

Paul Go, EY Global IPO Leader, says:

“A record year for IPOs in 2021 gave way to increasing volatility from rising geopolitical tensions, inflation and aggressive interest rate hikes. Weakened stock markets, valuations and post-IPO performance have further deterred IPO investor sentiment. As the pipeline continues to build, many companies are waiting for the right time to revive their IPO plans. Still, with tightening market liquidity, investors are more risk-averse and favor companies that can demonstrate resilient business models in profitability and cash flows, while clearly articulating their ESG agendas.”

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