Multiple Crosswinds Superseded Global IPOs Despite Market Rally in 2023

• In 2023, global IPO volumes fell 8%, with proceeds down by 33% YOY
• Asean’s IPO market saw deal volume increase by 3% and proceeds down by 20% YOY
• Indonesia led ASEAN market in terms of IPO volume with 50% of ASEAN IPOs in 2023 listing in the Indonesian Stock Exchange
  
• New hotspot markets outpaced IPO powerhouses

JAKARTA, 16 JANUARY 2024. The Global IPO market closed 2023 with 1,298 IPO raising US$123.2b. Overall the global IPO market in 2023 has experienced shifting landscapes with improved Western market sentiment counterbalanced by China's cool-down, as well as a contrast between hot developing market small-cap deals and lacklustre large offerings. When comparing to 2022, IPO proceeds in 2023 lagged last year’s tepid pace by roughly a third, although deal volumes have picked up in both the Americas and EMEIA regions. These and other findings are available in the EY Global IPO Trends 2023.

Despite a strong market rally and low volatility index on the back of positive economic data, public offerings have remained subdued in many developed markets, with the exception of a brief September window in the US. After two years of muted listings, IPO issuers and investors were keen to take the ride of a market upswing, but this enthusiasm dampened after September when high-profile IPOs sank underwater, impacting market sentiment. Equity investor fixation on mega technology stocks in the face of macro uncertainty also left less appetite for new listings. Extraordinarily aggressive monetary policies were another major factor affecting IPO activity, superseding the influence of overall stock market performance.

Benchmarking against five-year average IPO activity, highlights include Indonesia, Malaysia and Turkey notching increases in deal volume and proceeds. Meanwhile India, Saudi Arabia and Thailand recorded an increase in the number of IPOs vs. five-year average. In contrast, Hong Kong’s IPO market experienced a 20-year low in proceeds this year, and the pace of IPO issuance in Mainland China slowed in the latter half of 2023.

The industrials and consumer sectors had positive movement this year, with industrials having the most deals and consumer being the only sector to increase by both IPO volume and proceeds. In contrast, the technology sector continued to experience declines driven by underwhelming investor reception to high-profile tech IPOs in the US and generative artificial intelligence (GenAI) startups still being in the venture capital stage. Despite this, technology IPOs still led the pack for proceeds for 2023. There has also been a significant downturn in IPO volume and proceeds within the health and life sciences sector – particularly in Mainland China and the US. The number of companies backed by private equity and venture capital within this sector plummeted by 78% since 2021. Sector IPO trends reflect shifting global economic and supply chain dynamics, which bring new winners and losers across sectors – although strong fundamentals still win out overall.

Indonesia’s Soaring IPO Volume Contributed by Minerals and Tech Unicorns Maturity and Readiness to Tap Public Capital Market

Indonesia’s equity capital market has been growing at a promising rate over the past year, propelling the Indonesian Stock Exchange into the top 5 exchanges globally by total number of IPOs in 2023, and establishing itself as the leader in the ASEAN market in terms of IPO volume. Among the catalysts driving this trend is the expanding global demand for Indonesia’s abundant mineral resources, which are crucial to produce green energy. This is a momentum companies are evidently seeking to capitalize on, as reflected in the listings of Amman Minerals, Harita Nickel and Merdeka Battery, which collectively generated proceeds of ~USD 2.0bn.

Meanwhile, the growing interest around the transition to renewables, which has been a key theme of discussion among players in the utilities sector, has prompted the listings of companies like Pertamina Geothermal and Barito Renewables, which raised ~USD 600mn and 200mn in its respective IPOs. The country’s large and growing population is another driving force behind activity in the market, providing ample opportunity for companies such as Nusantara Sejahtera Raya, which owns the Cinema XXI brand, and helped it to raise ~USD 150mn in total proceeds. Furthermore, the strategic privatization of state-owned enterprises has also played a significant role in the surge of Indonesia’s IPOs, sparking interest among investors.

Reuben Tirtawidjaja, EY Indonesia Strategy and Transactions Partner, says:

“The surge of IPOs in the industrials and consumer sectors is likely to continue into Q1 2024. The digital economy could be the ones leading the charge, as the interest among the country’s tech unicorns to access the capital market has been evident. The positive trend of IPO activities could further be enhanced by more supportive government regulations and measures in providing a more accommodating environment for businesses and investors alike.”

Furthermore, the shift of global supply chains to new geographies may drive growth as companies seeking to diversify their supply chains and reduce dependence on traditional markets. In this landscape, countries such as Indonesia may become increasingly attractive given its robust economic growth and favourable business environment, including drivers such as a growing middle class, increasing urbanization and digital transformation. For Indonesian companies specifically, this translates to potentially higher market valuations due to international exposure and demand, making IPOs an increasingly attractive strategic avenue as it could provide with the capital necessary to expand operations, invest in new technologies, and gain a competitive edge in the marketplace.

Reuben, adds:

“Indonesia is set to hold its presidential elections in the first quarter of 2024, which historically has resulted in higher market volatility and uncertainty, resulting in reduced IPO activity as companies adopt a wait-and-see position. However, this usually is followed by high market activity post-election, especially if upcoming policy changes are seen to be promoting a business-friendly environment, which will in turn boost investor confidence.”

Overall Regional Performance: 2023 Wasn’t the Year the Regions Thought It Would Be

While the number of Americas IPOs in 2023 was up 15% compared with 2022, proceeds jumped nearly three times that of 2022 due to several high-profile deals. In total, 153 deals raised US$22.7b, with over 85% of them listing on US exchanges. The region had seven deals that raised over US$500m in 2023 vs. just four in 2022, but smaller deals continue to dominate IPO activity on US exchanges. Brazil’s IPO market surpassed a two-year absence of listings amid global instabilities, marking the most prolonged drought in over two decades. In Canada, its main exchange featured only one IPO each in 2022 and 2023 – this level of IPO activity is unprecedented on this exchange over the last two decades. Overall, in the Americas, weak IPO trading performance, rising interest rates and geopolitical concerns have contributed to challenging capital raising conditions for companies seeking to access the public markets.

This year, 732 companies went public in Asia-Pacific raising US$69.4b, a YOY fall of 18% and 44% respectively. Facing economic and geopolitical headwinds, 2023 was challenging for Asia-Pacific’s IPO markets, with the two powerhouses of Mainland China and Hong Kong continuing to decline in volume and value. The average deal size of cross-border listings from Mainland China to the US also fell to its lowest level in 20 years, with a 93% drop from its 2021 levels. However, Mainland China remained a vital source of IPO funding, contributing over 40% of global proceeds in 2023. In the Asia-Pacific IPO market, well-capitalized companies backed by private equity and venture capital in the environmental, social and governance (ESG) and technology spaces have the capital to wait out until valuation improves. Realistic pricing and post-IPO performance may encourage some of these companies that are prepared for IPO with strong governance and a good equity story to list in 2024.

Across Asean, the IPO market remained robust, with a total of 157 deals (3% YOY increase) raising US$5.6b (20% YOY decrease) in 2023, up from 152 deals raising US$6.9b in 2022. Asean exchanges that were the most active in 2023 were Indonesia (79 IPOs raising US$3.6b), Thailand (37 IPOs raising US$1.1b) and Malaysia (32 IPOs raising US$801m). The three Asean countries recorded an increase in the number of IPOs versus a five-year average. Singapore and Philippines hosted six and three IPOs on their exchanges, raising US$35m and US$75m respectively.

Chan Yew Kiang, EY Asean IPO Leader says:

“Here in Asean, we saw the average deal size falling. Well-capitalized companies may wait out until valuation improves. Realistic pricing and strong post-IPO performance may also encourage companies with strong governance, a good equity story and are prepared for IPO, to list. Companies’ performance post-IPO will be monitored closely, and if positive, may spur new listings. While high interest rates will continue to have an impact on investors sentiments, we observed that there is increasing interest for companies in the region to explore cross-border listings.

In Singapore, there were six completed IPOs with US$35m raised. This does not include Singapore’s de-SPAC (special purchase acquisition company) transactions at US$676m. In December 2023, we saw Singapore’s first completed de-SPAC and the first live-streaming company to be listed on the SGX. This is an encouraging sign for fast-growing companies in the technology, life sciences and green industries to consider SGX or other Asean exchanges when looking to list.”

The EMEIA IPO market is on its path to recovery, with a 7% rise in volume, even with a 39% decrease in proceeds, on the back of large deals from MENA, heightened activity in India and CESA, as well as a few high-profile cross-border IPOs to the US. This region rounded out the year with 413 deals, raising US$31.1b. And, even though 5 of the world’s largest 10 deals were from EMEIA, the region had a greater number of smaller IPOs than large ones compared with 2022, hence the fall in total proceeds. MENA continued to dominate the top 10 EMEIA IPOs in 2023, accounting for 6 of those IPOs. In the UK, challenging market conditions, compounded by high inflation and elevated interest rates, have muted IPO activity. Overall in EMEIA, the outlook for 2024 is optimistic but cautious, given an unpredictable market environment. In various countries, governments and regulators are taking steps to stimulate capital markets to boost investment in disruptive innovation.

2024 Outlook: Candidates Must Be Prepared

George Chan, EY Global IPO Leader, says:

“Enthusiasm for IPOs is high and smaller deals are emerging with improved after-market performance. While many governments are taking measures to boost IPOs, activity is particularly strong in high-growth economies. Before monetary policy eases and geopolitical climate stabilizes, IPO-bound companies should keep their eyes on building fundamentals and managing price expectations to capitalize on the fleeting windows as 2024 progresses.”

Globally, moderating inflation and potential 2024 interest rate cuts could attract investors back to IPOs by improving liquidity and return outlooks. However, sustained geopolitical instability may undermine confidence.

Broadly, the year ahead hinges on improving macro backdrop for an IPO revival as companies eagerly await more favorable market conditions to widen the IPO windows. When headwinds abate, confidence may rebound, and markets will present opportunities for IPOs again.

IPO candidates looking to go public in 2024 will need to be well-prepared. Key factors to consider are: inflation and interest rate, government policies and regulations, recovery of economic activities, geopolitical tensions and conflicts, ESG agenda, and global supply chain. Multitrack options should also be considered, from alternative IPO processes (direct listing or dual and secondary listings) to other financing methods (private capital, debt or trade sale).

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About the data

The data presented here is available on ey.com/ipo/trends. 2023 refers to the full calendar year and covers completed IPOs from 1 January 2023 to 4 December 2023, plus expected IPOs by 31 December 2023 (forecasted as of 4 December 2023). All data contained in this document is sourced from Dealogic, Capital IQ and Wind, and EY analysis unless otherwise noted. The Dealogic data in this report are under license by ION. ION retains and reserves all rights in such data. SPAC data are excluded from all data in this report, except where indicated.