12 May 2023

Global IPO markets have cooled down

The global IPO market experienced a slowdown in 2022 and is expected to continue in 2023, primarily due to persistent inflation, higher interest rates and the ongoing conflict in Ukraine, which have negatively impacted investor sentiment. White & Case's latest report provides an overview of current trends and developments in the global IPO industry.

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The first quarter of 2023 was remarkably quiet in the global IPO market. With only 284 IPOs (excluding SPAC listings) listed, this is the lowest number since Q2 2020, when the markets were first hit by the COVID-19 pandemic. The total deal value for Q1 2023 was just $25 billion, compared to the pandemic-hit Q2 2020, when $35.7 billion worth of deals were closed. Looking back to 2022, Mergermarket data shows that there were a total of 1,380 IPOs globally (excluding SPAC listings), a 42% decline from the previous year. However, this is still a strong performance given that the six-year average prior to 2021 was 1,562 IPOs per year. In terms of the value of funds raised, there has been a significant decline. The volume of $153.9 billion in transactions (excluding SPACs) was down 65% year-on-year, the lowest level recorded since 2016.

There has been a significant geographic shift in 2022, with the Americas moving from being the top player in global IPO deal value in 2021 to becoming the world's most quiet regional market. Excluding SPACs, the total value of IPOs in the Americas was only US$7.4 billion, a 95% year-on-year decline, and this amount was spread across just 179 listings, a sharp 67% year-on-year decline. This shift can be attributed primarily to the strong focus of US equity markets on the technology sector, which is particularly sensitive to the rising cost of capital.

In contrast, the APAC (Asia-Pacific) region was somewhat of an exception, leading in terms of both value and volume indicators. The region recorded US$107.4 billion in IPOs and 967 standalone listings (excluding SPACs), representing a year-on-year decline of only 42% and 25% respectively. Although the APAC region typically leads in IPO activity due to the scale of its shared economy, it was interesting to see its relative strength in the current circumstances, underpinned by a rapidly evolving macro environment.

EMEA (Europe, Middle East and Africa) ranks among the Americas and APAC in terms of IPO activity. The $39.1 billion in IPOs spread across 234 transactions (excluding SPAC) resulted in a 63% and 59% year-on-year decline, respectively. Throughout the year, investor confidence was impacted by the Russian invasion of Ukraine, which cast a shadow over European equity markets, and elevated energy prices added to uncertainty. IPO activity in the EMEA region can be considered a tale of two markets, with the Middle East being a bastion in the region, contributing three of the world's top 10 IPOs and seven of the top 25 deals. While the conflict in Ukraine has negatively impacted investor confidence in Europe, the price of oil has risen sharply, boosting economies in the Middle East and emboldening investors who have attracted foreign capital to the region.

In the first quarter of this year, there was a positive mood on the markets and expectations that the market has already stabilized and will allow companies to launch IPOs soon. Unfortunately, there was further trouble in March when liquidity problems emerged at major banks in the US and Europe following the collapse of Silicon Valley. Investors were looking ahead and interest rates were rising in response to inflationary pressures. Nevertheless, there are reasons for cautious optimism about the outlook to the end of 2023 as signs of disinflation begin to emerge.

The full report can be found here.