Given the restrictions on face-to-face meetings, we have seen that virtual roadshows have been adopted by issuers instead of the traditional two-week marketing period meeting investors face-to-face. Once life returns to something near to normality it will be interesting to see if this trend continues or deal teams revert to more traditional marketing routes. In all likelihood it will move to a hybrid model of both face-to-face and virtual, but only time will tell.
The Main Market indices are all trading broadly 22% lower than the start of the year but have recovered from the losses witnessed earlier in the year. With major market sector constituents such as oil & gas, travel and financial services still feeling pressure from the pandemic, it is unlikely the market will recover until these sectors themselves see some recovery. By contrast, the NASDAQ market with significant weighting towards technology is trading some 20% above the position at the end of 2019.
The AIM has outperformed the Main Market in the year to date, trading broadly where it started the year. This has been driven by growth in online retailers share prices as a result of changes in consumer buying behaviour, as well as, companies in the healthcare sector selling COVID related products and potential treatments.
Global IPO activity
Mirroring the restart of activity in London, globally Q3 2020 was the most active third quarter in the last 20 years by proceeds and the second highest third quarter by deal numbers. Exchanges around the world posted 447 IPOs with proceeds totalling US$95.0b, 78% and 138% higher than this time last year. The stellar record by proceeds can be attributed to the most active August and September for IPOs in the last 20 years.
Shanghai, Shenzhen and NASDAQ exchanges led by deal numbers in Q3 2020, accounting for 54% of global IPOs. Shanghai dominated global exchanges by proceeds in Q3 2020, accounting for 25% of global IPO proceeds, while the NYSE and NASDAQ ranked second and third (each accounting for 17%). Technology, healthcare and industrials were the most active sectors on these four exchanges.
To find out more about the global IPO activity in this quarter, visit our Global IPO Trends following the link here.
Looking forward — 2020
After a break in Q2, market activity has returned and we expect this to continue. The markets have successfully operated during lockdown and the IPO process has adopted to working in the COVID world.
Despite the pandemic there is a healthy pipeline of companies wishing to IPO, with a number having already come to market at the start of Q4. We can expect further issuances from technology-based companies that have been less impacted by physical restrictions and whose business plans may have actually been accelerated by the pandemic.
More traditional businesses may need to sit on the side-lines until the impact of the pandemic recedes.
We will also continue to see an elevated level of follow-on issues, as companies seek to repair COVID impacted balance sheets and other listed companies take advantage of situations that may arise and transact deals with concurrent equity offerings.
That said, we should expect the unexpected in Q4. With the US election in early November, Brexit trade negotiations still on-going and the potential resurgence of the pandemic there are numerous factors that can drive an increase in market volatility.
Globally - optimism, with some fragility, is expected in global IPO markets. The Asia-Pacific markets are on track to exceed their 2019 performance and in the Americas strong IPO markets are expected to continue through the end of the year and we expect a higher level of IPO activity around US election time due to the strong IPO pipeline built up during the lockdown.
In terms of sectors, we believe that technology, health care and industrials will continue to be the most popular investor choices along with companies that can demonstrate resilience and adapt to the current environment, or those that have an opportunistic advantage in the new norm.