Megadeals and unicorn IPOs characterize 2018 deal landscape; trend to continue in 2019

Singapore, 17 December 2018

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  • 2018 IPO activity charts a steady course despite volatility and uncertainty
  • Technology sector leads with record number of 40 unicorn IPOs raising US$32.2b
  • 2019 to start cautiously with IPO activity set to rise in second half of the year

Global IPO proceeds rose in 2018, supported by investor confidence, large pools of liquidity, strong valuations and low interest rates. Year-to-date, 2018 has registered 1,359 IPOs with proceeds of US$204.8b – a 6% increase on proceeds despite a 21% decline in volume. The rise of unicorn-related IPO activity and mega IPOs were key factors in helping to push 2018 proceeds beyond 2017 levels. This trend is expected to continue into 2019, with the backlog of IPO candidates increasing and capital becoming more widely available.

In terms of deal volume Asia-Pacific declined but still dominated with Americas and EMEIA accounting for a higher share of deal volume. The technology, industrials and health care sectors were the most prolific sectors by deal numbers in 2018, together accounting for 652 IPOs (48% of global IPO by deal numbers) and raising US$84.2b in total (41% of global proceeds).

Activity in Q4 2018 (326 IPOs and proceeds of US$53.7b) was 34% lower in deal volume and 10% lower by proceeds compared with Q4 2017. Market volatility and continued geopolitical uncertainty were contributing factors in a strong decline in quarter-over-quarter IPO activity in all regions during Q4 2018, signaling what is set to be a cautious start to 2019. These and other findings were published today in the EY quarterly report, Global IPO trends: Q4 2018.

Dr. Martin Steinbach, EY Global and EY EMEIA IPO Leader, says:

“Through a fog of uncertainty, IPO markets around the world found a clear path forward and investment opportunities ultimately delivered returns in 2018, as investor confidence, mega IPOs and the rise of IPOs by unicorn companies helped provide assurance for IPO investors. While the fourth quarter was weak, the year ended as expected, with 2018 activity held back toward the end of the year by geopolitical tensions, trade tensions among the US, China and EU, and the looming exit of the UK from the EU.”

Asia-Pacific benefits from megadeals across the region

Asia-Pacific continued to dominate global IPO activity, accounting for six of the top ten exchanges globally by deal number and five of the top ten exchanges by proceeds. However, 2018 deal volumes (666 deals) were down by 31% versus 2017, while proceeds (US$97.1b) were up by 28% due to a number of mega IPOs in the region.

Japan posted 97 IPOs in 2018, a modest 2% increase in terms of volume compared to 2017, but representing a significant 333% increase over 2017 proceeds. New listing rules on weighted voting rights and pre-revenue biotech companies attracted high-profile technology and biotech companies to list in Hong Kong, with Hong Kong’s Main Market and Growth Enterprise Market seeing a rise of 24% by deal number (197 deals) and 120% by proceeds (US$35.4b) in 2018 compared with 2017.

Asean saw a slight decline in IPO volume by 7% in 2018 (115 deals) versus 2017, while proceeds fell by 34% to hit US$7.1b. Specifically for Q4 2018, Asean IPO volumes and proceeds declined by 27% and 46% respectively.

The Indonesia Stock Exchange (IDX) saw the highest deal numbers among Asean exchanges in 2018, accounting for 45% of Asean deal volume and 16% by proceeds. With 36% each, Vietnam and Thailand stock exchanges led in Asean exchanges by proceeds. Each of these exchanges hosted two sizeable IPOs during 2018.

Max Loh, EY Asean and Singapore Managing Partner, Ernst & Young LLP, comments:

“On the whole, 2018 was relatively quiet in the Southeast Asia IPO markets, as economic uncertainty, trade tensions and emerging market issues persist. Looking ahead to 2019, with Asean exchanges innovating to build their IPO pipeline, and if geopolitical and economic volatility subsides, we may see more sustained IPO activity in the second half of 2019.”

Americas IPO momentum sustained in 2018

With 261 IPOs raising US$60.0b, deal volumes and proceeds of Americas IPO markets in 2018 exceeded 2017 numbers by 14% and 16%, respectively. The US remained in the spotlight as the leading source of IPOs in 2018, accounting for 79% of Americas IPOs and 88% by proceeds. Twenty-nine percent of US exchange IPOs were cross-border, with 60 companies from 15 countries choosing to list in the US during 2018, an increase from 24% in 2017.

EMEIA increased global IPO market share riding the wave of global geopolitical tensions

In EMEIA, deal volumes (432) and proceeds (US$47.7b) were down in 2018. EMEIA’s 2018 IPO activity was 16% and 26% lower, respectively, than 2017 in terms of number of deals and proceeds, with geopolitical tensions having a clear impact on IPO activity. Despite this, EMEIA exchanges remained strong as the world’s second largest IPO market providing two of the global top five megadeals in 2018, and contributing four unicorn IPOs (which raised US$2.7b).

2019 outlook: a cautious start will lift in second half of the year

Looking ahead, a number of uncertainties are likely to prevail in 2019. Trade tensions between the US, China and the EU; the outcome of Brexit; and uncertainty with respect to the stability of a number of European economies, are set to continue and ultimately determine overall IPO sentiment. At the same time, with interest rates expected to rise in the US, the European Central Bank may in time feel the pressure to follow suit, which will also influence IPO activity in the quarters to come.

While 2019 IPO deal numbers could be below those recorded in 2018, it is likely that global proceeds could meet or exceed high 2018 levels, particularly if a greater number of unicorn companies and more companies from the technology, industrials, consumer products and health care sectors come to the public capital markets in 2019, as expected. Cross-border activity is expected to maintain its momentum well into 2019, with the US, Hong Kong and London continuing to be the top destinations for IPO activity.

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Notes to Editors

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About the data

The data presented in the Global IPO trends: Q4 2018 report and press release is from Dealogic and EY. Q4 2018 (i.e., October-December) and 2018 (January-December) is based on priced IPOs as of 5 December 2018 and expected IPOs in December. Data is up to 5 December 2018, 12 p.m. UK time. All data contained in this document is sourced to Dealogic, CB Insights, Crunchbase and EY unless otherwise noted.

EY - Megadeals and unicorn IPOs characterize 2018 deal landscape; trend to continue in 2019

Appendix: January 2018 to December 2018 global IPOs by sector

Sectors Number of IPOs Percentage of global IPOs Proceeds (US$m) Percentage of global capital raised
Consumer products and services 137 10.1% $8,396 4.1%
Consumer staples 82 6.0% $3,970 1.9%
Energy 59 4.3% $10,878 5.3%
Financials 92 6.8% $24,892 12.2%
Health care 193 14.2% $22,748 11.1%
Technology 254 18.7% $38,672 18.9%
Industrials 205 15.1% $22,783 11.1%
Materials 150 11.0% $9,813 4.8%
Media and entertainment 42 3.1% $6,495 3.2%
Real estate 82 6.0% $17,127 8.4%
Retail 42 3.1% $4,157 2.0%
Telecommunications 21 1.5% $34,877 17.0%
Global Total 1,359 100.0% $204,807 100.0%

Source: Dealogic, EY