As the market starts to shift, how can your IPO be built to last?

4 minute read 27 Sep 2023

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In Q3 2023, investor appetite shifts from growth to value amid tighter liquidity.

In brief
  • In the first nine months of 2023, global IPO volumes fell 5%, with proceeds down by 32% YOY.
  • Emerging markets made up 77% of the global share by number and 75% by proceeds.
  • Americas has seen clear growth, driven by large deals.

In the first three quarters of 2023, there were 968 IPOs globally, with US$101.2b in capital raised, a 5% and 32% decrease year-over-year (YOY), respectively. Despite this, market momentum is building, with Q3 having witnessed a notable improvement in post-IPO share price performance compared with previous quarters. The global IPO market has seen shifting dynamics, featuring improved investor sentiment in the major Western economies, the prospect of high-profile US mega IPOs, robust emerging markets and a cooling China IPO market. These and other findings are available in the EY Global IPO Trends Q3 2023.

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    Column chart showing global IPO activity by number of IPOs from 2019-2022 (full years), and year-to-date 2023. Complete data is as follows: full year 2019, 1,146; full year 2020, 1,452; full year 2021, 2,436; full year 2022, 1,415; year-to-date 2023, 968.

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    Column chart showing global IPO activity by IPO proceeds (US$b) from 2019-2022 (full years), and year-to-date 2023. Complete data is as follows: full year 2019, 208.3; full year 2020, 271.3; full year 2021, 459.9; full year 2022, 184.3; year-to-date 2023, 101.2.

In the past decade, IPO numbers and proceeds from emerging markets have both increased by more than 30%, primarily due to faster economic growth compared to developed countries. Until this point of 2023, emerging markets accounted for 77% of the global share by number and 75% by proceeds. They embraced new entrants to the active IPO arena, such as Turkey and Romania, in addition to the already thriving countries like Indonesia, Malaysia and India. In developed markets, the US witnessed a higher number of larger deals, while Japan and Italy contributed to the growth of smaller deals.

The technology sector continues to dominate global IPO activity in 2023. However, if excluding the blockbuster chip designer IPO from the US, the entire sector would register a decline in proceeds. As of now, there hasn't been substantial growth in IPO debuts for artificial intelligence (AI) start-ups, but they are beginning to emerge in the IPO pipeline. Industrials moved into the second spot amid solid expansion across most of its sub-sectors. Unicorn IPOs, on the other hand, have experienced a substantial decrease of more than 80% YOY, notably in classic growth sectors such as technology, and health and life sciences.

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Overall regional performance: post-IPO share price has improved across regions

The Americas region saw an outstanding 159% increase in proceeds, raising US$19.3b, YOY for the initial three quarters of 2023. Out of the 113 America's IPOs this year, 96 of them stemmed from the US. The US is also the only market that has attracted more cross-border IPOs and is welcoming long-awaited blockbuster IPOs. Special purpose acquisition company (SPAC) IPO activity thus far in 2023 has hit a seven-year low in terms of proceeds, falling to levels not seen since 2016. While the traditional IPO market shows signs of recovery, SPAC IPO activity is likely to be muted in the near term as the focus shifts to completing or unwinding those yet to de-SPAC. 

The initial nine months of 2023 present a mixed picture for Asia-Pacific IPOs, with volume and proceeds down YOY by 8% and 41%, respectively, even though the region presents an approximate 60% share of global market share. Governments across most of the region are trying hard to stimulate economic growth and IPO activity through initiatives such as reducing stamp duty taxes. Also, due to economic challenges in key markets, Asia-Pacific saw fewer deals than in the past two years. There is general optimism over large deals in the pipeline, with an expected modest uptick in IPOs next quarter. 

Since the start of the year, EMEIA saw 286 IPOs, which raised US$21.9b, a YOY increase of 2% in volume but a 44% reduction in proceeds. EMEIA-based stock markets have adapted to a “new normal” amid tightening in financial conditions and market liquidity, and stayed surprisingly robust and stable, with investors displaying increased confidence. A distinct trend in EMEIA is the growing interest in IPOs in the energy sector, along with environmental, social and governance (ESG)-related equity stories. 

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    Column chart showing IPO activity by geography in year-to-date 2023, in terms of percentage change versus Q1 to Q3 2022. The complete data per regions showing is as follows: Globally, the number of IPOs is down five percent, with total IPO proceeds down thirty-two percent. For the Americas, the number of IPOs is down three percent, with IPO proceeds up one-hundred and fifty-nine percent. For Asia-Pacific, the number of IPOs is down eight percent, with IPO proceeds down forty-one percent. For EMEIA, the total number of IPOs is up two percent, with total IPO proceeds down forty-four percent.

Q4 2023 outlook: new interest rate environment  

Faced with tighter liquidity and a higher cost of capital, investors are turning to companies with strong fundamentals and a path to profitability. In response, IPO prospects need to demonstrate their financial health and potential for value creation. As valuation gaps narrow, investors are reviewing the post-listing performance of the new cohort of IPOs, which, if positive, could renew market confidence.

Across major Western economies, interest rates are forecast to stay high as central banks try to bring persistent inflation down to target levels. Consequently, the cost of capital remains elevated which, along with tighter credit, makes financing more challenging.  

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    Column chart showing actual and estimated interest rate by country and area from 2021 to 2024. The complete data by country and area is as follows: United States actual interest rate for 2021 is 0.1 percent, for 2022 is 1.7 percent; estimated interest rate for 2023 is 5.1 percent and for 2024 is 4.9 percent. Eurozone actual interest rate for 2021 is 0 percent, for 2022 is 0.6 percent; estimated interest rate for 2023 is 3.8 percent and for 2024 is 3.8 percent. United Kingdom actual interest rate for 2021 is 0.1 percent, for 2022 is 1.5 percent; estimated interest rate for 2023 is 4.8 percent and for 2024 is 5.4 percent. India actual interest rate for 2021 is 4 percent, for 2022 is 4.9 percent; estimated interest rate for 2023 is 6.5 percent and for 2024 is 5.8 percent.

Investors will continue to care more about the fundamentals, such as a strong balance sheet, healthy cash flows, resilience amid weak economic conditions, rather than how fast the company can grow and how high the valuation could reach. Investors are also likely to be more interested in companies with an ESG concept and those that can demonstrate the adoption of AI applications into the business models and operations.

IPO candidates will need to be agile with innovative business models, be resilient when facing supply chain constraints and macroeconomic challenges, have strong working capital and be able to adapt to new ways of doing business by embracing technology and AI applications. 

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  • Data definitions for all charts

    The data presented on this webpage and in the EY Global IPO press release Q3 2023 is sourced from Dealogic, Capital IQ, Oxford Economics, SPACInsider and EY analysis unless otherwise noted. The Dealogic data are under license by ION. ION retains and reserves all rights in such data. SPAC data are excluded from all data in this report, except where indicated.   

    Q3 2023 refers to the third quarter of 2023 and covers completed IPOs from 1 July to 18 September 2023, plus expected IPOs by 30 September 2023 (forecasted as of 18 September 2023). Q3 2022 refers to the third quarter of 2022 and covers completed IPOs from 1 July to 30 September 2022.  YTD 2023 or Q1-Q3 2023 refers to the first nine months of 2023 and covers completed IPOs from 1 January 2023 to 18 September 2023, plus expected IPOs by 30 September 2023 (forecasted as of 18 September 2023). Q1-Q3 2022 refers to the first nine months of 2022 and covers completed IPOs from 1 January 2022 to 30 September 2022.  Sources: EY analysis, Dealogic.

    • In compiling the IPO statistics included in these reports and press releases, we focus only on IPOs of operating companies and define an IPO as a "company's offering of equity to the public on a new stock exchange".
    • This report includes only those IPOs for which Dealogic and EY teams offer data regarding the first trade date (the first day on which the security start trading on a stock exchange), and proceeds (funds raised, including any over-allotment sold).
    • The first trade date determines which quarter a deal is attributed to. Postponed IPOs, or those that have not yet been priced, are therefore excluded. Over-the-counter (OTC) listings are also excluded.
    • In an attempt to exclude non-operating company IPOs such as trusts, funds and special purpose acquisition companies (SPACs), companies with the following Standard Industrial Classification (SIC) codes are excluded:
      • 6091: Financial companies that conduct trust, fiduciary and custody activities.
      • 6371: Asset management companies such as health and welfare funds, pension funds and their third-party administration as well as other financial vehicles.
      • 6722: Companies that are open-end investment funds.
      • 6726: Companies that are other financial vehicles.
      • 6732: Companies that are grant-making foundations.
      • 6733: Asset management companies that deal with trusts, estates and agency accounts.
      • 6799: Special purpose acquisition companies (SPACs).
  • Definitions for IPO performance by geography

    • Africa includes Algeria, Botswana, Egypt, Ghana, Kenya, Madagascar, Malawi, Morocco, Namibia, Rwanda, South Africa, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe.
    • Americas includes Argentina, Bermuda, Brazil, Canada, Chile, Colombia, Ecuador, Jamaica, Mexico, Peru, Puerto Rico and the United States.
    • ASEAN includes Brunei, Cambodia, Guam, Indonesia, Laos, Malaysia, Maldives, Myanmar, North Mariana Islands, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.
    • Asia-Pacific includes ASEAN (listed above), Greater China (as stated below), Japan, South Korea, Australia, New Zealand, Fiji and Papua New Guinea.
    • EMEIA includes Armenia, Austria, Bangladesh, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Kazakhstan, Luxembourg, Lithuania, Netherlands, Norway, Pakistan, Poland, Portugal, Russian Federation, Spain, Sweden, Switzerland, Turkey, Ukraine and United Kingdom plus the Middle East countries (listed below) and Africa countries (listed above).
    • Greater China includes Mainland China, Hong Kong, Macau and Taiwan.
    • India region includes IPO activity in Indian and Bangladesh stock exchanges. 
    • Middle East includes Bahrain, Iran, Israel, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen.
  • Definitions for IPO deals by sector and IPO proceeds by sector

    Sectors are classified according to Thomson general industries using a company’s Sector Industry Classification (SIC) code. There are 11 sectors, which are defined below with their specific industries. The 11 sectors are shown on the horizontal axis.

    • Consumer includes the combination of “Consumer staples” and “Consumer products and services” sectors. Its specific industries include: agriculture and livestock, food and beverage, household and personal products, textiles and apparel, tobacco, educational services, employment services, home furnishings, legal services, other consumer products, professional services, as well as travel services. 
    • Energy industries include alternative energy sources, oil and gas, other energy and power, petrochemicals, pipelines, power, as well as water and waste management.
    • Financials industries include asset management, banks, brokerage, credit institutions, diversified financials, government sponsored enterprises, insurance, as well as other financials.
    • Health and life sciences industries include biotechnology, health care equipment and supplies, health care providers and services (HMOs), hospitals, as well as pharmaceuticals.
    • Industrials industries include aerospace and defense, automobiles and components, building/construction and engineering, machinery, other industrials, transportation, as well as infrastructure.
    • Materials industries include chemicals, construction materials, containers and packaging, metals and mining, other materials, as well as paper and forest products.
    • Media and entertainment industries include advertising and marketing, broadcasting, cable, casino and gaming, hotels and lodging, motion pictures or audio visual, other media and entertainment, publishing, as well as recreation and leisure.
    • Real estate industries include non-residential, other real estate, real estate management and development, as well as residential.
    • Retail industries include apparel retailing, automotive retailing, computers and electronics retailing, discount and department store retailing, food and beverage retailing, home improvement retailing, internet and catalogue retailing, as well as other retailing.
    • Technology industries include computers and peripherals, electronics, internet software and services, IT consulting and services, other high technology, semiconductors, as well as software.
    • Telecommunications industries include other telecom, space and satellites, telecommunications equipment, telecommunications services, as well as wireless.

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The global IPO market in the first three quarters of 2023 has seen shifting dynamics featuring improved market sentiment in the western countries, the prospect of successful US mega IPOs, robust emerging markets, and a cooling China IPO market. As investors shift their preference from growth to value, IPO prospects need to demonstrate their financial health and potential for value creation.

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