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, said EY recently.
Overall, 256 IPOs came to the market in Q3 2019 with total proceeds of US$40.2 billion, a decrease of 24% by volume and 22% by proceeds compared with Q3 2018, according to the company.
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$114.1 billion) versus YTD 2018, EY noted.
Highlights of EY’s report titled Global IPO trends: Q3 2019
- 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$69.4 billion (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$41.5 billion).
- Technology was also the strongest sector in Q3 by deal numbers and proceeds and saw 59 IPOs (23% of global IPOs by deal volume) which raised US$11.4 billion (28% of global proceeds)
Muted Asia-Pacific IPO activity lifted by Shanghai’s STAR Market
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, said EY.
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, EY added.
However, ongoing trade tensions between China and the US continue to impact IPO activity across parts of the region, EY observed.
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, the firm pointed out.
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, EY noted.
Asia Pacific highlights
- 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$2.9 billion.
- 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).
The much-anticipated debut of Shanghai’s STAR Market in Q3 2019 did not disappoint as initial activity on the new exchange overshadowed more muted performance in Hong Kong (China), Japan and Australia, and elevated Asia-Pacific IPO activity above Q2 2019 results,” said Ringo Choi, EY Asia-Pacific IPO Leader, adding that this was also boosted by the rebound of activity on Southeast Asia exchanges during Q3 2019.
“Going forward, the China-US trade tensions may continue to raise uncertainty among investors in some parts of the region,” Choi noted. “The Asia-Pacific IPO market will soon recover if mega IPOs can complete their listings promptly during the last quarter of the year.”