How can you prepare to seize the right moment?

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 number of IPOs and proceeds took a nosedive, with 130 deals raising US$9b, down by 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 by the global economic downturn and geopolitical tensions, accounting for 63% of deals and 67% of funds raised in 2022. Mainland China is on course towards another record-breaking year of capital raising by the close of 2022.

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.  

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, more favorable conditions seem to be set in place for global IPO activity 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 COVID-19 pandemic effects on the economy. 

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

“As pipeline continues to build, many companies are waiting for the right time to revive their IPO plans,” says Go.

“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,” he adds.