27th September 2019 – The backlog of high-quality IPOs continues to grow as issuers await more favorable market conditions, pushing IPO activity down across many markets in Q3 2019 compared with Q3 2018. Overall, 256 IPOs came to the market in Q3 2019 with total proceeds of US$40.2b, a decrease of 24% by volume and 22% by proceeds compared with Q3 2018.The first nine months of 2019 (YTD 2019) saw a decline of 26% by deal volume (768 IPOs) and a 25% drop in funds raised (US$114.1b) versus YTD 2018. While deal numbers were down, average first-day returns on the main markets were 27% and average current post-IPO performance was 32%.

Technology, health care and industrials saw the largest share of IPOs in YTD 2019, together accounting for 407 IPOs (53% of global IPOs by deal volume) and raising a combined US$69.4b (61% of global proceeds). Technology continued to be the strongest sector by deal numbers and proceeds in YTD 2019, representing 23% of global deal volume (179 IPOs) and 36% of proceeds (US$41.5b). In Q3 2019, technology was also the strongest sector by deal numbers and proceeds and saw 59 IPOs (23% of global IPOs by deal volume) which raised US$11.4b (28% of global proceeds). These and other findings were published today in the EY quarterly report, Global IPO trends: Q3 2019.

Paul Go, EY Global IPO Leader, says: “A quiet Q3, combined with persistent geopolitical uncertainties, has led to tepid third-quarter results across global IPO markets. Although Q3 2019 IPO activity is down both in deal numbers and proceeds compared with this time last year, Shanghai’s STAR Market was launched in July 2019 to much fanfare, raising investor sentiment in that region. Elsewhere around the world, the backlog of some larger IPO issuers waiting for the winds to change continues to grow. As we enter into the traditional peak IPO season, we expect global IPO activity to pick up in the last quarter and into 2020 when there is more clarity to US-China trade tensions and developments around Brexit.”

Muted Asia-Pacific IPO activity lifted by Shanghai’s STAR Market; SGX among top 10 global exchanges by proceeds

In Asia-Pacific, YTD 2019 IPO volume was down 9% (436 IPOs) and proceeds decreased by 27% (US$46.1b) compared to the same period in 2018. The launch of Shanghai’s STAR Market offset more muted activities in Hong Kong, Japan and Australia in Q3 2019, with Asia-Pacific exchanges seeing a decline of 2% by deal volumes (173 IPOs) and 29% by proceeds (US$23.7b) in Q3 2019 compared to Q3 2018. Ongoing trade tensions between China and the US continue to impact IPO activity across parts of the region.

However, Asia-Pacific continued to dominate global IPO activity in Q3 2019, representing seven of the top 10 exchanges by volumes and five of the top 10 exchanges by proceeds. Average first day returns for IPOs on Asia-Pacific’s main markets rose to 51%, while average current returns soared to 71%, predominantly because of Shanghai’s STAR Market activity.

Japan saw a quiet quarter for IPO activity, with deal volume declining 57% (12 IPOs) and proceeds dropping 74% (US$488m in total) versus Q3 2018.

In Southeast Asia, performance rebounded considerably as the region saw 40 IPOs come to market with proceeds of US$2.9b. Southeast Asian exchanges saw 48% higher deal numbers and 555% higher proceeds during Q3 2019 compared with Q3 2018 (27 IPOs and US$440m in proceeds).

Indonesia (IDX) and Malaysia (Bursa Malaysia, ACE Market and LEAP Market) exchanges, with 21 deals and 9 deals respectively in Q3 2019, came up among the top 10 exchanges globally by number of deals. The Singapore Exchange (SGX), driven by listings of two sizeable REITS that raised US$1.37b in the quarter, came up among the top 10 exchanges by proceeds.

Max Loh (羅錦偉), EY Asean IPO Leader, says: “Despite ongoing market challenges, the rebound in activity on Southeast Asia exchanges during Q3 2019 reflects the backlog of IPO aspirants waiting for the right time to come to market. Southeast Asian exchanges will continue to benefit from IPOs of entrepreneur-led companies and privatization of state-owned companies and, in the case of Singapore, REITS and business trust, given its leading position in that space.”

Americas IPO markets impacted by quiet third quarter and equity market volatility

On a quarterly basis, the Americas saw 47 IPOs that raised US$11.9b in Q3 2019, a drop of 30% by deal volume and 10% by proceeds from Q3 2018. Both YTD 2019 IPO deal volume and proceeds also fell behind compared with the same period in 2018, with 160 IPOs in the first nine months of 2019 (a decline of 22%) and US$46.9b in proceeds (a decline of 9%).

However, US exchanges accounted for the majority of IPOs in the Americas region, 79% by number of deals and 95% by proceeds YTD in 2019. This was driven by several high-profile technology unicorns that have gone public so far this year. The NASDAQ and NYSE ranked first and second respectively by proceeds globally in YTD 2019.

Jackie Kelley, EY Americas IPO Leader, says: “Historically, Q3 has always been a quiet quarter. Yet, while IPO activity slowed in Q3 2019, the momentum we saw in Q2 2019 endures. Geopolitical uncertainty continues to play a role. However, we anticipate any increases in volatility to be temporary, with an expectation that activity will pick up in Q4 2019.”

EMEIA continues to face geopolitical headwinds

In EMEIA, deal volumes and proceeds were down from YTD 2018 with EMEIA exchanges posting 172 IPOs (a decline of 52%) and raising a total of US$21.1b (also a decline of 41%). Ongoing US-EU-China trade tensions have dampened both market sentiment and the economic outlook in EMEIA. At the same time, with no deal in sight, Europe and UK are bracing for the risk of a hard Brexit in Q4 2019.

Despite these challenges, EMEIA accounted for three of the top ten exchanges globally by proceeds in Q3 2019 (Deutsche Börse with US$1.7b from 1 IPO, NASDAQ OMX with US$1.3b from 3 IPOs and India’s National and Bombay Exchanges with US$858m from 9 IPOs). Cross-border IPO activity increased slightly to 10% in YTD 2019 from 9% in 2018. Additionally, investor sentiment and appetite for IPOs could improve in Q4 2019 due to a longer than expected low interest rate environment and supportive monetary policy.

Dr. Martin Steinbach, EY EMEIA IPO Leader, says: “EMEIA is caught in the eye of a perfect storm. In Q3 2019, the region continued to face headwinds in the form of ongoing US-China-EU trade issues and Brexit uncertainty. IPO activity is expected to pick up after a quiet Q3 as we are heading into the most active IPO season of the year. The region is riding the tailwind from a longer-than-expected low interest rate environment, especially in Europe which is pushing investors to look for high-return assets. Moreover, investors are more selective, with an appetite for larger and higher-quality equity stories and growth investments especially in technology sectors. As we move into the final quarter of 2019, we will likely see EMEIA IPO issuers accelerate their IPO plans to get ahead of potential slower economic growth.”