The initial public offering (IPO) market has started the year on a “cautiously optimistic” note in the Americas and Europe, the Middle East, India, and Africa (EMEIA), according to a new report from professional services firm EY.
During the first quarter, global IPO volumes fell 7% to 287 deals which raised US$23.8 billion, representing a 7% increase in proceeds, the report showed.
The Americas saw stronger IPO activity in 1Q when compared to the previous quarter and the first quarter of 2023.
52 deals rose US$8.4 billion in proceeds, reflecting a 21% sequential increase and 178% jump over the year-ago quarter.
“The US, after experiencing a 20-year low in proceeds in 2022, has finally witnessed a noticeable recovery in the first quarter of the year, riding on the wave of the market rally from last year,” EY highlighted in its report.
“The risk appetite of equity investors has rebounded in the early months of the year, attracting more IPOs from growth sectors, e.g., Reddit from technology and BrightSpring Health Services from health and life sciences.”
Each of the top seven deals in the Americas raised more than US$500 million, compared to one deal of this size in the year-ago quarter.
Meanwhile, the EMEIA IPO market saw 116 IPOs for proceeds of US$9.5 billion, up 40% and 58% year-over-year respectively, attributed to larger average deal sizes from IPOs in Europe and India.
According to the report, Europe’s IPO market is also experiencing a recovery but at a more cautious pace than the US.
“Investors in Europe continue to place greater emphasis on companies with solid fundamentals and a path to profitability,” EY wrote in the report.
“Since late 2023, larger and even mega European deals have begun to emerge, although some opted for US listings.”
IPO market sentiment was subdued in the Asia-Pacific, with 119 deals raising $5.8 billion in proceeds, down 34% and 56% year-over-year respectively.
A trend noted in EY's report is that IPO markets saw a significant number of newly issued debuts during the quarter whose current share prices surpassed their offer prices.
This could signal an improvement in valuations and pricing levels, reflecting growing confidence among issuers and investors alike, the firm suggested.
"As 2024 unfolds, participants in the IPO market are entering uncharted territory. IPO candidates are influenced by the recent pivot in investors' preference toward proven profitability in an altered interest rate landscape, and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the buzz around AI,” EY Global IPO Leader George Chan commented.
“To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts."