EY expects better global IPO activities in second half of year

KUALA LUMPUR: EY sees favorable conditions lifting global initial public offering (IPO) activities to "greater momentum” by the second half of the year (2H23) despite a "somber performance through at least the first quarter.”

Citing its EY Global IPO Trends 2022 report, the international business consulting firm said many prospective IPO companies "are still going to take the ‘wait-and-see’ approach, holding out for the right window.”

"For now, investors will focus more on a company’s fundamentals, such as revenue growth, profitability, and cash flow, over just growth projections,” it said in a statement today.

EY said the global IPO activity in 2022 tumbled 45 per cent year-on-year with only 1,333 IPOs taking place, raising US$179.5 billion, while the number of deals and proceeds decreased by 61 per cent year-on-year.

Throughout 2022, global IPO activity was impacted by increased market volatility and other unfavorable market conditions, along with the dismal performance of many IPOs that were listed since 2021, it noted.

"Amid an environment defined by higher inflation and rising interest rates, investors have spurned new public companies and turned to less risky asset classes,” it said.

Similarly, EY noted that financial-sponsored IPO activity took a steep fall of 77 per cent and 93 per cent by number and proceeds, respectively.

It said that most special purpose acquisition companies (SPACs) listed from late 2020 were also reaching their two-year window, and they must now either find a target to merge or return the IPO proceeds to their investors.

"While these numbers represent a stark decline from 2021, global IPO deals still turned up a 16 per cent increase by number when compared to pre-pandemic 2019,” it added.

In Southeast Asia, there was a total of 137 IPOs raising US$6.5 billion last year compared with 134 IPOs raising US$13.2 billion in 2021, according to EY.

Leading in performance were Indonesia (60 IPOs raising US$2.2 billion), Thailand (32 IPOs raising US$3.1 billion) and Malaysia (29 IPOs raising US$0.7 billion), followed by Philippines (eight IPOs raising US$0.5 billion) and Singapore (eight IPOs raising US$40 million).

Notably, the number of larger listings on Southeast Asia exchanges was limited in 2022, but with reduced COVID-19 restrictions, there might be a return of larger IPOs in 2023.

EY said for the IPO market to become more active again, there are a number of prerequisite conditions, namely "positive sentiment and an uptick in stock market performance, lower inflation and ending of interest rate hikes, easing of geopolitical tensions, and diminished pandemic effects on the global economy.” - Bernama