5 minute read 13 Jul 2019
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Why global IPO activity has continued to slow in Q2 2019

By

Martin Steinbach

EY EMEIA IPO Leader

Over 20 years of experience in the corporate finance field: IPO, M&A, private equity, venture capital and mezzanine finance. IPO thought leader.

5 minute read 13 Jul 2019

Some companies are waiting for geopolitical uncertainties to pass, but others went public regardless in Q2 2019.

The trend of unicorn IPOs coming to market and pushing their proceeds to historic levels continued in Q2 2019 despite continuing geopolitical uncertainty and trade tensions, resulting in 507 IPOs in H1 2019 and raising total proceeds of US$71.9b.

While deal numbers were down 28% from H1 2018, first-day returns on the main markets were up 15.4% on average, and post-IPO performance increased 28.4%.

Download our quarterly IPO trends report here.

Technology, health care and industrials were the most active sectors in H1 2019

Technology, health care and industrials saw the largest share of IPOs in H1 2019, together accounting for 266 IPOs (52% of global IPOs by deal numbers) and raising US$47.8b altogether (66% of global proceeds).

By proceeds, technology was the strongest sector with US$29.3b raised (41% of global proceeds).

High-growth sectors

66%

of global IPO proceeds were raised by technology, health care and industrials in H1 2019.

Americas IPO markets rebounded

On a quarterly basis, the Americas saw 87 IPOs that raised $28.1b in Q2 2019, representing an increase of 5% by deal numbers and a rise of 50% by proceeds from Q2 2018. However, YTD 2019 activity was down 14% with 118 deals, and proceeds fell by 12% to US$33.6b, compared with YTD 2018.

Finally, a wave of much-anticipated, household-name unicorns entered the US IPO market, reigniting IPO activity and sparking an increase in constructive investor sentiment.
Jackie Kelley
EY Americas IPO and Financial Accounting Advisory Services Capital Markets Leader

Despite this, the NYSE and NASDAQ ranked first and second respectively by proceeds globally in H1 2019. US exchanges accounted for 75% of Americas IPOs by number of deals (88 IPOs) and 96% by proceeds (US$32.2b) in H1 2019, driven by several high-profile technology unicorns that went public during Q2 2019.

Jackie Kelley, EY Americas IPO Leader, summarizes the trends: “Finally, a wave of much-anticipated, household-name unicorns entered the US IPO market, reigniting IPO activity and sparking an increase in constructive investor sentiment. The majority of IPOs delivered positive post-IPO returns in the quarter, especially high-growth companies, which sets the stage for continued momentum in IPO activity.”

Asia-Pacific IPO plans have been accelerated to get ahead of economic headwinds

Trade tensions between China and the US continued to inhibit IPO activity in YTD 2019, which saw a return to 2018 levels. IPO activity across the Asia-Pacific region in YTD 2019 was down 12% by volume (266 IPOs) and 27% by proceeds (US$22.3b), compared with YTD 2018.

However, Asia-Pacific continued to dominate global IPO activity in YTD 2019, by volume, representing six of the top 10 exchanges. By proceeds, the region accounted for three of the top 10 exchanges. Asia-Pacific’s main markets experienced average first-day returns of around 19% and average current returns of 34%, illustrating that IPO performance continues to elevate IPO investor sentiment.

The prospect of a potential economic downturn had many companies accelerating their IPO plans.
Ringo Choi
EY China South Managing Partner and EY Asia-Pacific IPO Leader

Mainland China exchanges saw 27% more IPOs (33 IPOs) in Q2 2019 compared with Q2 2018, but a 38% decline in funds raised (US$5.1b) due to a lack of mega IPOs. However, Mainland China IPO activity is expected to improve during H2 2019 following the launch of the Sci-Tech innovation board (STAR Market) on the Shanghai Stock Exchange.

Japan’s IPO markets remained stable in YTD 2019, posting a slight increase in deal numbers compared with YTD 2018. There were 41 IPOs in YTD 2019 versus 39 IPOs in YTD 2018 while proceeds (US$1.3b) were notably lower than YTD 2018 (US$2.8b).

Ringo Choi, EY Asia-Pacific IPO Leader, says: “While ongoing trade issues between the US and China continued to influence investor sentiment across Asia-Pacific, the prospect of a potential economic downturn had many companies accelerating their IPO plans. As IPO candidates race to get ahead of economic headwinds, and as average post-IPO performance remains positive, we expect Asia-Pacific IPO activity levels to rise in the second half of 2019.”

Guide to Going Public

Strategic considerations before, during and post-IPO

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EMEIA continue to proceed cautiously within persistent geopolitical uncertainties

In EMEIA, deal volumes and proceeds were down from YTD 2018 with EMEIA exchanges posting 123 IPOs (a decline of 53%) and raising a total of US$16.0b (also a decline of 48%). Despite these challenges, EMEIA accounted for five of the top 10 exchanges globally by proceeds and two by deal numbers. Overall, due to strong first-day returns and YTD IPO performance and investor confidence, EMEIA IPO markets are expected to gain momentum in the second half of 2019.

Europe experienced a notable increase in IPO activity in Q2 2019, with volumes up 100% (48 deals) and proceeds up a significant 3,338% (US$12.5b) from Q1 2019.

Both domestic and cross-border activity also gathered steam in the UK in Q2 2019 as 11 companies went public, representing proceeds of US$4.5b.

Despite challenges, EMEIA accounted for five of the top 10 exchanges globally by proceeds and two by deal numbers.

EMEIA is a region that is more dependent than others on global trade, and therefore, more sensitive to persistent geopolitical uncertainties. Given that the largest trades flows in the world are between the US as well as China with the European Union, EMEIA serves as a bellwether in determining global economic health.

If the US and China can resolve their trade and tariff issues, and if the UK and the EU can agree on terms for an orderly Brexit, we can expect IPO activity to rebound in the second half of 2019. In the meantime, EMEIA IPO candidates continue to prepare so that they are ready to leap when the timing is right.

Mega IPOs and robust IPO pipelines across all regions will bolster future activity

Following the trend of increased unicorn IPO activity, Q2 2019 welcomed a number of much-anticipated, high-profile unicorns. The global IPO activity slowdown continued following an unusually quiet Q1 2019 as ongoing geopolitical tensions, trade issues among the US, China and the EU, Brexit and the outcome of European elections dampened IPO sentiment.

The main way for issuers to navigate the shift from old to new realities in unpredictable markets is to remain flexible. So well-prepared companies, with the right equity story, will find their windows of opportunity. We expect higher IPO activity in the second half of 2019.

Summary

Despite a number of unicorn IPOs coming to market in Q2 2019, overall activity slowed because of geopolitical uncertainty and trade tensions.

About this article

By

Martin Steinbach

EY EMEIA IPO Leader

Over 20 years of experience in the corporate finance field: IPO, M&A, private equity, venture capital and mezzanine finance. IPO thought leader.