- Asia-Pacific accounted for 78% of global IPO proceeds due to mega IPOs
- Q1 2022 global IPO volumes fell 37%, with proceeds down by 51% year-on-year (YOY); Asean IPO volume rose 32%, with proceeds down by 57% YOY
- This was despite the strongest January in 21 years by proceeds
After record-high levels of global IPO activity in 2021, volatile market conditions have resulted in a significant slowdown during the first quarter of 2022. The year started off strongly, continuing the momentum of Q4 2021, with January producing the strongest opening month in 21 years by proceeds. However, by the second half of the quarter, worldwide stock market declines shifted the trajectory dramatically in the opposite direction, resulting in a significant drop in overall activity. For Q1 2022, the global IPO market saw 321 deals raising US$54.4b in proceeds, a decrease of 37% and 51% YOY, respectively.
The sudden reversal can be attributed to a range of issues, both emerging and residual. These include the rise in geopolitical tensions; stock market volatility; price correction in over-valued stocks from recent IPOs; growing concerns about a rise in the commodity and energy prices; impact of inflation and potential interest rate hikes; as well as the COVID-19 pandemic risk continuing to hold back a full global economic recovery.
In line with the sharp decline in global IPO activity there was a considerable fall in cross-border, unicorn, mega (proceeds above US$1b) and SPAC IPOs. There were also a number of IPO launches postponed due to market uncertainty and instability. These and other findings were published today by the EY organization.
Overall regional performance
IPO activity in the Americas region completed 37 deals in Q1 2022 raising US$2.4b in proceeds, a decline of 72% in the number of deals and a 95% fall in proceeds YOY. The Asia-Pacific region recorded 188 IPOs raising US$42.7b in proceeds, a decline YOY of 16% for volume, but an increase of 18% in proceeds. EMEIA market IPO activity in Q1 2022 reported 96 deals and raised US$9.3b in proceeds, a decline YOY of 38% and 68%, respectively.
Paul Go, EY Global IPO Leader, says:
“A decrease in IPO activity was not unexpected when compared with Q1 2021 as the latter was the most active quarter in the last 21 years. However, the market shock from geopolitical tensions and other economic concerns in the second half of the quarter created volatility and impacted the capital markets. While markets continue to be volatile, and uncertainties on economic recovery remain for reasons including continuing concerns around COVID-19, there is a risk that IPO activity will continue to slow further with IPO candidates choosing to postpone their transactions. Companies need to be well prepared to access the market when the window opens, likely for a shorter timeframe, and include a careful review of business models and preparation of alternative fund-raising plans.”
Asia-Pacific IPO proceeds rose 18% in Q1 2022 benefiting from mega IPOs
The Asia-Pacific region started the year strongly with an 18% rise in proceeds YOY, despite a 16% decline by deal numbers in Q1 2022. Four of the seven mega IPOs in Q1 2022 globally were listed in this region, including two of Q1’s largest IPOs by proceeds. The region saw 188 IPOs raising US$42.7b in proceeds, surpassing Q1 2021 which had raised the highest Q1 proceeds in 21 years. In terms of sector activity, industrials led by volume (40 IPOs, US$3.3b), followed by materials (37 IPOs, US$5.3b), while energy and telecommunications led by proceeds (US$11.2b via 8 IPOs and US$8.5b via 3 IPOs, respectively).
Greater China saw a 28% decline in deals (97) and a modest 2% rise in proceeds (which raised US$30.1b) YOY. Hong Kong saw notably slower IPO activity due to recent market volatility, a severe outbreak of Omicron cases and a relatively bigger fall in the local stock market indices. While Mainland China also saw a small decline in deal numbers, proceeds rose YOY due to hosting three of the seven mega IPOs in Q1 2022.
After the largest number of IPOs seen in 2021, Japan’s IPO activity slowed in Q1 2022, with a number of small cap IPOs coming to the market. Overall Japan saw 15 IPOs raise US$0.2b in total proceeds.
South Korea carried its strong IPO momentum from 2021 into January 2022, with Korea Exchange’s largest ever IPO raising US$10.7b. IPO activity was slower in February, prior to South Korea’s presidential election in March. In Q1 2022, Korea saw 19 IPOs with total proceeds of US$11.2b, a 21% decline in deal numbers but a 368% rise by proceeds.
Asean’s exchanges saw a 32% increase in deal numbers (29 IPOs in Q1 2022, up from 22 IPOs in Q1 2021), but a 57% decline in proceeds (US$1b in Q1 2022, down from US$2.4b in Q1 2021). The notable decline in proceeds was due to the lack of a mega IPO being posted in Q1 2022, compared to 1 mega IPO a year ago. During this quarter, Indonesia’s IDX was most active by deal numbers (12 IPOs raising US$219m), while Malaysia’s exchanges led by proceeds (US$362m via 5 IPOs). In other Asean exchanges, Thailand’s exchanges saw 5 IPOs raising US$228m, the Philippines Stock Exchange had 4 IPOs raising US$201m while Singapore’s Catalist welcomed 3 IPOs raising US$17m.
Max Loh, Singapore and Brunei Managing Partner, Ernst & Young LLP and EY Asean IPO Leader, says:
“Geopolitical tensions, the ongoing COVID-19 situation, supply chain woes, tightening of monetary policy and escalating costs are a few – but clearly significant – factors that are weighing down economic and IPO activity. The IPO market remains receptive to quality high-growth companies, but volatility, uncertainty and valuation expectations will need to be tempered before a resurgence in IPO activity can happen.”
Americas IPO markets pale in comparison to Q1 2021
IPO activity in the Americas region weakened this quarter in comparison to the record- breaking Q1 2021, with deals down 72% (37 IPOs) and proceeds falling by 95% (US$2.4b). Health and life sciences led the number of deals while a single large deal drove financials to lead by proceeds. In the Americas, the materials sector followed by number of deals, driven solely by the smaller Canadian exchanges (CSE and TSX-V), while health and life sciences ranked second by proceeds.
The pace of SPAC IPOs and mergers slowed amid challenging market conditions. Activity is expected to pick up as the year progresses because more than a quarter of the 600+ active SPACs expire later this year and more than 60% expire in the first half of 2023.
Brazil's IPO market ground to a halt in 2022 as dozens of companies cancelled or postponed deals. Volatility in the Brazilian market is expected to continue with elevated inflation and interest rates, and a fragile fiscal position, coupled with upcoming elections and consequences from geopolitical tensions.
Rachel Gerring, EY Americas IPO Leader, says:
“This year continues to test the resiliency and agility of companies looking to go public. With increased volatility in the markets and uncertainties surrounding geopolitical crises, oil prices and inflation, there is increased focus on public company readiness to give companies the flexibility to capitalize when market conditions are optimal.”
EMEIA’s IPO market affected by market volatility
Recent elevated market volatility from geopolitical tensions unsurprisingly impacted EMEIA equity markets and subsequent corporate activity. Many IPO candidates in the region postponed their IPOs until a clearer picture emerges on the economic outlook. Overall EMEIA saw 96 IPOs, a decline of 38% YOY, proceeds raised were US$9.3b, a 68% decline YOY. On a more positive note, the global financial markets remain open and functioning despite the continued uncertainty.
In the first quarter of 2022, Europe accounted for 15% of global IPO deals and only 5% by proceeds. Two European exchanges were among the top 12 exchanges by deal numbers and by proceeds raised. Deal numbers in Europe were 47 with proceeds of US$2.7b raised. In the UK, the slower pace of IPO activity was due to a dip in investor confidence from Q4 2021 that carried into 2022. Q1 2022 saw eight IPOs in the UK with total proceeds of US$113m, a YOY decline of 60% by deal number and a dramatic 99% fall by proceeds.
Dr. Martin Steinbach, EY EMEIA IPO Leader, says:
“The current geopolitical tensions and widespread uncertainty in many EMEIA equity markets are forcing IPO dealmakers to look at alternative options or to consider delaying their IPO until calmer waters arise. We have already seen a number of IPO postponements in the short-term which has resulted in a quiet first quarter of this year. It remains challenging for companies to determine the right timing and alternative strategies that provide access to funding for further growth. IPO candidates should continue to prepare and keep all options open.”
Shift in sector performance
The first quarter saw some slight shifts in sector performance partly due to the changing economic environment and market conditions. Both the technology and materials sectors led by number of IPOs with 58 each, raising US$9.9b and US$5.9b, respectively. This was followed by industrials (57 IPOs raising US$5b). Technology continued its dominance by deal numbers for the seventh consecutive quarter (since Q3 2020) but ranked second by proceeds – breaking a streak of seven consecutive quarters raising the highest IPO proceeds since Q2 2020.
In Q1 2022, energy took the lead in terms of proceeds (US$12.2b via 15 IPOs), driven by Q1’s largest IPO on the Korea Exchange, while telecommunications came third (US$8.6b via six IPOs) due to Q1’s second largest IPO on the Shanghai Stock Exchange.
Q2 2022 outlook: use the pause to re-examine your business in face of the unprecedented challenges
Paul Go says: “As many uncertainties remain, the market will remain volatile with a backlog of IPO candidates and pipelines will continue to build up. With the prevailing headwinds arising from geopolitical tensions and conflicts, inflation and interest rate hikes, it will be imperative for IPO-bound companies to take a fresh look at how these challenges will affect their markets, customers and suppliers to their business.”
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About the data
The data presented here and available on ey.com/ipo/trends is from EY and Dealogic. Q1 2022 (i.e., January–March) is based on completed IPOs from 1 January 2022 to 23 March and expected IPOs by the end of March 2022. Data as of close of business 23 March UK time. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase, SPAC Insider and EY unless otherwise noted. Special purpose acquisition company (SPAC) IPOs are excluded in all data included in this report, except where indicated.