The number of global initial public offerings (IPOs) fell 8% with proceeds down 61% year-over-year in the first quarter of 2023, according to a new report by EY.
A total of 229 IPOs raised $US21.5 billion in the first quarter of the year.
EY noted that while technology continued to lead in IPO volume, four of the top 10 listings in 1Q 2023 were in the energy sector.
“Tech IPOs continue to deliver the highest number of deals, but average transaction size is dwarfed by the energy sector. This trend is in line with the steep downward correction in tech company valuations over the past 18 months,” the firm said.
Special purpose acquisition company (SPAC) IPO activity was dampened by high liquation and poor post-listing performance, hitting a six-year low in terms of volume and proceeds falling to levels not seen since 2016, EY said.
SPAC IPO activity is likely to be muted in the near term, EY forecast, as market conditions remain challenging, and as many promoters of SPACs listed in early 2021 need to complete or unwind their transactions.
Regional IPO performance
IPO activity in the Americas during 1Q was in line with the year-ago quarter, but well below levels seen in comparable periods over the last decade, according to EY.
There were 31 deals on US exchanges, eight of which were in excess of US$50 million, and Canada saw its biggest IPO since May 2022, raising more than US$100 million in proceeds.
The Asia Pacific IPO market, which accounted for 59% of global IPO deals, saw activity decline by 6% by number and 70% by proceeds year-over-year with 175 deals and US$12.7 billion in proceeds during the quarter.
Activity in Mainland China and Hong Kong was quieter than usual, EY noted. “More Mainland Chinese companies are expected to list overseas in the coming quarters, with a flurry of companies primed to debut on the US and Swiss stock exchanges,” the firm said.
Europe, the Middle East, India, and Africa (EMEIA) IPO activity fell by 19% by number and 36% by proceeds year-over-year during 1Q, with 84 IPOs raising US$6.2 billion.
The Middle East was the only region with a “mega IPO” during the quarter, which generated US$2.5 billion in proceeds.
2Q 2023 outlook
EY stated that, despite the unforgiving economic and geopolitical backdrop, there was light on the horizon, with peaking inflation, energy prices softening, and the rebound of Mainland China’s economy. The backlog of IPOs, however, continues to build as companies wait for stock markets to stabilize before listing, it said.
Once there is evidence of a more stable market with higher certainty, investor confidence should return, and prominent companies that had postponed IPO plans may restart, albeit at more modest valuations, EY forecast.
“Amidst persistent macroeconomic and geopolitical uncertainty, exacerbated by stress in the global banking system, IPO windows are fleeting and funding conditions are getting tougher, with investors prioritizing value over growth,” commented EY global IPO leader Paul Go.
“IPO-bound companies need to focus on building sustainable businesses with strong fundamentals to be well-positioned in a volatile environment and meet the challenges and opportunities of going public.”
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