27th June 2019 – The trend of unicorn IPOs coming to market and pushing their proceeds to historic levels continued in Q2 2019 despite ongoing geopolitical uncertainty and trade tensions, resulting in 507 IPOs in H1 2019, 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%.
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). These and other findings were published today in the EY quarterly report, Global IPO trends: Q2 2019.
Dr. Martin Steinbach, EY Global and EY EMEIA IPO Leader, says: “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.”
Asia Pacific IPO plans accelerated to get ahead of economic headwinds
Ongoing trade tensions between China and the US continued to impact IPO activity in YTD 2019, inhibiting 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 YTD 2019, by volumes, representing six of the top ten exchanges. By proceeds, the region accounted for three of the top ten 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.
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).
Asean exchanges saw a total of 48 IPOs, raising US$2.0b in proceeds in YTD 2019, posting a slight decline (8%) in deal volume, with proceeds notably lower (a 55% decline), compared to H1 2018. During the period, Indonesia Stock Exchange (IDX) saw the highest deal numbers, accounting for 35% of deal volume and 10% by proceeds in the region, while the Singapore Exchange (SGX) led by proceeds; its main and junior markets together accounted for 61% of Asean proceeds and 17% by deal number.
In Q2 2019, Asean saw a notable increase in deal numbers (29 IPOs, a 53% rise) over Q1 2019 and a significant boost in proceeds (US$1.7b, a 447% rise), suggesting some signs of market recovery. The SGX ranked 10th among global exchanges by proceeds for Q2 2019 due to two sizeable real estate investment trust IPOs.
Max Loh, EY Asean and Singapore Managing Partner, Ernst & Young LLP says:
“Economic uncertainty and ongoing trade issues continued to cast a shadow over IPO markets across the Asean region. Entrepreneurial companies accounted for the majority of IPOs that launched in the first half of 2019. The notable increase in small-cap listings consolidates the view that there is still a general propensity for entrepreneurial companies to go public. As geopolitical volatility subsides and as average post-IPO performance stabilizes, we expect Asean IPO sentiment to commensurately improve.”
Americas IPO markets rebound
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 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.
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, says: “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.”
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 ten 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.
Steinbach says: “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.”
