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EY Global IPO Trends 2023 Summary

Core Content Overview

The EY Global IPO Trends 2023 report highlights the evolving dynamics of the global IPO market, emphasizing the impact of macroeconomic factors, geopolitical tensions, and shifting investor sentiment. It outlines the performance of IPOs in different regions and sectors, identifies key trends, and offers insights for companies considering an IPO in 2024.

Main Points and Key Insights

1. Global IPO Market Performance in 2023

• IPO activity declined in 2023 compared to 2022, with global proceeds falling by 33%.
• Q4 2023 saw a significant drop in both the number and proceeds of IPOs, with a 19% decline in global deals and a 39% drop in proceeds.
• Americas saw a strong rebound, with a 15% increase in deal volume and a 155% rise in proceeds.
• Asia-Pacific experienced a sharp decline, with a 41% drop in deal numbers and a 60% decrease in proceeds.
• EMEIA (Europe, Middle East, India, and Africa) saw an increase in both deal numbers and proceeds, though at a slower pace than the Americas.

2. IPO Performance and Market Conditions

• IPO performance lagged behind buoyant equity markets, especially in developed economies.
• Mega-cap stocks dominated stock market gains, drawing investor attention away from smaller, newer IPOs.
• Aggressive monetary tightening and high interest rates reduced liquidity and increased financing costs, deterring IPO activity.
• After-market performance was underwhelming, indicating a mismatch between investor and issuer expectations.
• Cross-border listings showed mixed results, with smaller deals outperforming larger ones, and Chinese-to-US listings seeing a 93% drop in average deal size since 2021.

3. Regional Highlights

• Emerging markets like Indonesia, India, and Turkey outperformed in IPO returns, driven by economic growth and favorable market conditions.
• Hong Kong and the UK faced challenges due to liquidity issues, regulatory uncertainty, and geopolitical tensions.
• EMEA had the best IPO performance, with 70% of IPOs exceeding offer prices, and Turkey leading with 100% positive returns.

4. CEO and Investor Sentiment

• CEOs remain interested in IPOs, with 40% of private company CEOs in the October 2023 EY CEO Outlook Pulse Survey exploring IPOs, divestments, and spin-offs.
• Private equity professionals also expect a rebound in IPO activity in 2024.
• IPOs in 2023 yielded higher returns than benchmark indexes in key Asian markets like Indonesia, India, and Japan.

5. Sector Trends

• Consumer sector was the only one to see an increase in both IPO volume and proceeds, driven by innovation and customer-centric strategies.
• Technology sector faced a decline in IPO numbers and valuations, though semiconductor and AI-related companies remained prominent.
• Energy and materials sectors saw a rise in IPO activity, particularly in renewable energy, battery commodities, and critical minerals, reflecting global demand for green energy and EV-related products.
• Health and life sciences sector also experienced a downturn, with significant declines in both volume and proceeds, especially in China and the US.

6. IPO Backlogs and Delays

• IPO backlogs are growing in growth sectors like technology and health and life sciences due to market uncertainty and regulatory changes.
• China has seen a surge in pulled deals, contributing to the global decline in IPO activity.
• Companies are advised to build strong fundamentals and manage pricing expectations to prepare for potential market rebounds in 2024.

Key Takeaways for 2024

• Moderating inflation and potential interest rate cuts in 2024 could improve liquidity and investor confidence.
• Geopolitical stability and improved US-China relations may help revive IPO activity.
• Small cross-border listings are more likely to succeed in the current environment.
• Valuation alignment between issuers and investors is crucial for successful IPOs.
• Strategic timing and execution of IPOs will be key to capitalizing on market opportunities.

Conclusion

The global IPO market in 2023 was marked by a decline in activity, particularly in Asia-Pacific and traditional powerhouses like the US and Europe, while emerging markets and smaller deals showed resilience. Despite challenges, there is a growing appetite for IPOs among CEOs and investors, with optimism for a potential revival in 2024. Companies are advised to focus on fundamentals, pricing strategy, and cross-border opportunities to navigate the current market environment and position themselves for future success.