BrazilResearch: Asia Pacific bucks global slump in IPO activity
After record-high levels of global IPO activity in 2021, volatile market conditions triggered by the Ukraine war has led to a significant slowdown in IPO activity during the first quarter of this year. Asia Pacific however managed to buck the global trend.
In Q1 of 2022, the global IPO market saw 321 deals raising $54.4 billion in proceeds, a decrease of 37% and 51% year-on-year, respectively, according to analysis by EY.
While January opened the year with “the strongest opening month in 21 years by proceeds”, in the days and weeks after Russia invaded Ukraine (on 24 February 2022) stock markets took a major hit and, in its slipstream, so did demand for initial public offerings.
In the Americas, IPO activity ended the quarter at 37 deals raising $2.4 billion in proceeds, a decline of 72% in the number of deals and a 95% fall in proceeds year-on-year. In the Europe, Middle East, India and Africa region, 96 IPO deals closed raising $9.3 billion in proceeds, a decline of 38% and 68%, respectively.
“The current geopolitical tensions and widespread uncertainty in many equity markets are forcing IPO dealmakers to look at alternative options or to consider delaying their IPO until calmer waters arise,” said Martin Steinbach, EY EMEIA IPO Leader.
According to EY’s report, the Russia – Ukraine war has unleashed a number of unfavourable developments for IPOs, including geopolitical tensions, stock market volatility, growing concerns about a rise in the commodity and energy prices, inflation and potential interest rate hikes, and a more uncertain future outlook.
Paul Go, EY’s Global IPO Leader, added that the decrease in activity also followed from “a correction to over-valued stocks from recent IPOs”, in particular mega IPOs.
Managing to buck the global nosedive is the Asia Pacific region, which recorded 188 IPOs in Q1 2022 raising $42.7 billion in proceeds – an increase of 18% in value, despite a 16% decline in deal numbers. However, one quarter of Asia Pacific proceeds came from just one deal – the mega IPO of battery manufacturer LG Energy Solution (South Korea) which raised $10.7 billion in January.
In terms of Asia Pacific sector activity, industrials led the way by volume (40 IPOs, $3.3 billion), followed by materials (37 IPOs, $5.3 billion), while energy and telecommunications led by proceeds ($11.2 billion via 8 IPOs and $8.5 billion via 3 IPOs).
Meanwhile, four of the seven mega IPOs in Q1 2022 globally were listed in Asia Pacific – a fact usually reserved for the Americas.
Greater China saw a modest 2% rise in proceeds (which raised $30.1 billion), Japan’s IPO activity slowed (15 IPOs raised $0.2 billion in total proceeds), while South Korea saw stellar growth with 19 IPOs raising $11.2 billion, a 368% rise by proceeds driven by the listing of LG Energy Solution.
“The IPO market remains receptive to high-growth companies, but volatility, uncertainty and valuation expectations will need to be tempered before a resurgence in IPO activity can happen,” said EY’s Asean IPO Leader, Max Loh.
Looking ahead, EY’s experts expect the market to remain volatile. “Geopolitical tensions, the ongoing Covid-19 situation, supply chain woes, tightening of monetary policy and escalating costs will continue to grapple the markets,” said Loh. As a result, “a backlog of IPO candidates and pipelines will continue to build up” and “it will be imperative for IPO-bound companies to take a fresh look at how these challenges will affect their markets and models.”
