Timing is key for IPOs

  • Business
  • Saturday, 20 Jul 2019

British billionaire Sir Richard Branson's space tourism venture is set to go public by year-end and dozens more, including unicorns and tech stocks, are planning to raise funds in the capital markets this year.

Virgin Galactic is the first human spaceflight company with over 600 reservations for its first commercial flight to space. Branson needs funding in the race to space for his Virgin Galactic to take on Jeff Bezos’ (the world's richest man) Blue Ocean.

Timing, according to global professional services firm EY, is the biggest determining factor to launch an initial public offering (IPO).
It was reported that listings had a good year in 2018 globally, with 1,519 raising US$210.1bil, the highest proceeds since 2014.

Another report said that the number of IPOs globally is expected to fall to a range of 1,150-1,300 this year. Proceeds will meet or exceed the record amount raised in 2018. About 40 unicorns (companies with valuations above US$1bil) were listed in 2018, raising US$32.2bil.

The slowdown in global IPO activity continued in the first quarter of this year due to ongoing geopolitical tensions, the US-China trade tensions, Brexit and the outcome of the European elections. All these factors dampened IPO sentiment, said EY in its quarterly report entitled “Global IPO Trends: Q2 2019.’’

However, many remain bullish that this year would be a mega year for mega tech IPOs. Thus far, Uber, Pinterest, Zoom, Lyft and Tradeweb have gone public, while many more, including Airbnb and Palantir, are expected to make their debuts later this year.

EY said the main way for issuers to navigate the shift from old to new realities in an unpredictable market is to remain flexible. It believes that markets will stabilise, tensions will ease and there will be higher IPO activity in the second half of 2019 (2H19).

In its report, it said there have been 507 IPOs globally year-to-date, raising proceeds of US$71.9bil, of which 13 were unicorns.

However, by deal numbers, they were down 28% from 1H18, first-day returns on the Main Market were up 15.4% on average, and post-IPO performance has seen a 28.4% rise.

Technology, healthcare and industrials were the largest share of IPOs in 1H19 by volume (52%) and proceeds (62%), EY said.

This suggests that investors continue to strike a balance between new innovation and sticking with the basics.

As for the Asia-Pacific region, there was a 12% decline in volume and 27% by proceeds for IPOs due to prevailing geopolitical uncertainties. Greater China IPO markets remained resilient despite geopolitical tensions, EY said.

Asean remains a hotspot for unicorns, as experts believe a lot more unicorns will be created, given the buzz in the start-up market.

Asean deal volumes declined by 8% and funds raised dropped by 55% as compared to 1H18. Small and mid-cap entrepreneurial companies accounted for the majority of IPO activity in Asean.

However, EY said Asean saw a notable increase in deal numbers (a 53% rise) in the second quarter of 2019 (2Q19) over 1Q19 but significant boost in proceeds (a 447% rise), suggesting signs of market recovery.

The industrial segment was the most active sector by deal numbers in 1H19 (13 IPOs), followed by real estate, media and entertainment and consumer staples (each sector with six IPOs).


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