- Market liquidity and investor sentiment drove deals and proceeds up year-on-year
- Q3 2020 was the most active third quarter in the last 20 years by proceeds and the second highest third quarter by deal numbers
- Asean markets saw strong growth in IPO volume and proceeds in Q3 2020, compared to the previous quarter
Q3 2020 bucked the traditionally slow IPO period as the markets were awash with liquidity resulting in the most active third quarter in the last 20 years by proceeds, and the second highest third quarter by deal numbers. Globally, YTD IPO activity accelerated, resulting in a 14% increase in the total number of IPOs to 872, and an impressive 43% rise in proceeds of US$165.3b.
IPO activity in the Americas saw 188 deals raise US$62.4b in proceeds, increasing 18% and 33%, respectively YTD, while Asia-Pacific saw 554 IPOs raise US$85.3b in proceeds, rising by 29% and 88%, respectively YTD. Both markets have already exceeded YTD 2019 levels. While the EMEIA region rose quarter on quarter, IPO volumes are still down YTD by 27% (130) and proceeds by 24% (US$17.6b), respectively. Cross-border IPO activity levels have held steady by deal numbers and proceeds, accounting for 8% and 10% of global IPO activity, respectively.
As for sectors, technology, industrials and health care once again topped the ranks. Technology saw 210 IPOs raise US$53.9b, industrials saw 168 IPOs raise US$23.3b and health care saw 159 IPOs raise US$33.3b. These and other findings were published today in the EY quarterly report, EY Global IPO Trends: Q3 2020.
Paul Go, EY Global IPO Leader, says:
“Although the market sentiments can be fragile, the scene is set for a busy last quarter to end a turbulent 2020 that has seen some stellar IPO performance. The US presidential election, as well as the China-US relationship post-election, may be the key considerations in future cross-border IPO activities among the world’s leading stock exchanges. Despite the uncertainties, companies and sectors that have adapted and excelled in the ‘new normal’ should continue to attract IPO investors.”
Asia-Pacific IPO landscape grows stronger, window of opportunity remains open
YTD 2020 Asia-Pacific IPO activity has surpassed YTD 2019 activity by both volume (29%) and proceeds (88%). Activity in the region accelerated in part due to COVID-19 pandemic-related government stimulus policies, for example, employment subsidies provided to airlines in the region.
In Greater China, Q3 2020 IPO activities are on track to hit historic highs with deal numbers and proceeds up 152% and 139%, respectively year-on-year. As US-China trade tensions heighten leading up to the US presidential election, some Chinese companies listed on US exchanges chose to conduct a secondary listing on the Greater China exchanges, tapping into the Chinese equities market.
The market in Japan has also intensified compared to Q3 2019 with a 67% increase in numbers and 40% rise in proceeds.
Across Asean, there were 77 IPOs raising US$4.3b YTD, reflecting a slight dip in volume (down 13%) but an improvement in proceeds (up by 12%) compared to the same period last year. In Q3 2020, there were a total of 33 IPOs raising US$1.1b across Asean, up 175% in volume and 491% in proceeds from Q2 2020.
Across the Asean region, while Malaysia saw steady improvement in overall activity, the economic impact of the COVID-19 pandemic has been significant, particularly in Indonesia and Thailand. As a result, the region may take an extended time to recover. That said, Indonesia has one IPO in the pipeline that could raise US$500m before the end of the year, and Thailand has several sizeable IPOs in the pipeline that could go public in Q4 2020.
Max Loh, EY Asean IPO Leader, says:
“Robust IPO activity in Q3 2020 suggests that Asia-Pacific companies are seizing opportunities to go public to enhance resilience and improve their capital base for investments and growth. The strong valuations seen in some of the recently listed ‘new economy’ companies and those not impacted by the pandemic are giving positive signals to other potential IPO candidates looking to complete to their transactions in the quarters ahead. Asean IPO numbers are lagging behind those of other Asia-Pacific markets but with economic recovery and strong fundamentals, there are positive indicators that IPO momentum should follow.”
Americas IPO activity picked up the pace in Q3 2020
IPO activity in the Americas gained momentum overall, seeing an 18% increase in IPOs (188) and 33% increase in proceeds (US$62.4b) YTD, exceeding 2019 YTD levels. While the health care sector dominates YTD in number of IPOs (71), the technology sector leads in proceeds, raising US$22.3b through the quarter. The Americas have proven to be the birthplace of unicorn (privately held startup companies with a value of over US$1b) IPOs, launching 12 of 2020’s 18 IPOs in Q3 alone.
US exchanges accounted for the majority of IPOs with 82% of deals and 87% of proceeds in Q3 2020. In addition, the importance of Special Purpose Acquisition Company (SPAC) IPOs on US exchanges also rose in 2020. In other parts of the Americas, the Brazil IPO market picked up as low interest rates led investors to the stock market, with 13 IPOs through Q3 2020, compared to no IPOs during Q3 2019, putting 2020 on track to be the most active year in Brazil since 2007.
Rachel Gerring, EY Americas IPO Leader, says:
“Americas IPO activity accelerated since June; proceeds through Q3 2020 have exceeded full year IPO proceeds not seen since 2014. September was a record-breaking month for technology IPOs on US exchanges, with the highest number of IPOs observed in a single month in almost two decades. The IPO pipeline continues to build as companies plan for a public offering amidst optimism in the markets. While the US continued to account for a majority of IPOs, we are also seeing strong volume from Brazil’s IPO market.”
EMEIA IPO market gains momentum to get back on track
Following a slower H1 2020, EMEIA IPO markets gained significant momentum in Q3 2020 with deal numbers increasing 34% and proceeds rising 49% compared with Q3 2019, due in part to several large IPOs in the region. The region’s big winners are those riding on the tech digitalization wave – in particular technology, industrial and health care sectors.
In Europe, markets are beginning to rally, with Q3 2020 IPO numbers up 48% and proceeds increasing 51% as compared with Q3 2019. At the same time, the UK IPO activity increased for the region as a whole with a mega IPO (deals with proceeds greater than US$1b) demonstrating the available liquidity of the market and showcasing international investor interest for the right deal.
Dr. Martin Steinbach, EY EMEIA IPO Leader, says:
“EMEIA IPO activity rebounded in Q3 and IPO markets are getting back on track. Investor sentiment is improving, supported by the IPO momentum in the technology and health care sectors, highly liquid markets with volatility back to normal, low-interest-rate environments and index valuation levels close to pre-crisis levels. The IPO ecosystem has learned to live with the pandemic and remains impacted by the unusual uncertainties of it. We are expecting IPO activity to continue to rebound in the last quarter of the year.”
Q4 2020 outlook: expect the unexpected
This year has been nothing if not unpredictable. As we move into the final quarter of the year, investors may look to lock in profits as soon as they see signs of market uneasiness. Globally, a divergence between economic well-being, GDP and stock market valuations, may also cause anxiety among some investors. While there are some unknowns in the US-China trade tensions, the outcome of the US presidential election and uncertainties still surrounding Brexit, the outlook for Q4 remains positive with a healthy spread of deals in the pipeline across many markets. As long as the window of opportunity remains open, it is expected that deals will continue to be made.
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About the data
The data presented in the Global IPO trends: Q3 2020 report and press release is from Dealogic and EY. YTD 2020 (i.e., January-September) is based on completed IPOs as of 30 September 2020. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase and EY unless otherwise noted.