IPO Market Accelerating – Especially Overseas
The amount of investment in initial public offerings (IPOs) during March-April has jumped from January-February levels. Globally, the pick-up in IPOs is linked to the uptick in stock prices, which has allowed companies to tap into investor appetite for newer listings. A sizeable percentage of the offerings are in Asia, but Europe and the U.S. have experienced a surge as well. Activity during the first two months of 2023 had ground to a halt; new data compiled by Bloomberg demonstrates a much faster trend.
To date, there has been $25 billion worth of IPOs worldwide in March and April; this is nearly twice the amount transacted during the prior two months of the year. Companies headquartered from Hong Kong to Milan have put up their “Going Public” signs up as market volatility declined. The uptick in IPOs in Asia substantially moved the needle as non-U.S. exchanges accounted for nearly 80% of new share sales during April.
The uptick in Europe can’t be ignored either; European listings are higher by a wide margin compared to earlier in the year. The activity in the U.S. is not as robust but also noteworthy, as concern about a recession had been creating caution among potential U.S. issuers.
In a quote published by Bloomberg News, Jason Manketo global co-head of the law firm Linklaters’ equities practice said, “We are beginning to see green shoots of activity with companies restarting processes that were on hold, but there is still a fair degree of uncertainty in the market.” Mankel added, “The buy side is keen to see results for a couple of quarters before committing to an IPO. This means the potential pipeline of some 2023 deals has been moved out to 2024.”
Leaders
Statistically, Asia is where a great deal of the action is in the world today. But the activity is different, perhaps more appealing, than last year. In 2022 the vast majority of large deals were concentrated in mainland China; over the past two months, issuance is coming from a broader representation of Asia.
“The IPO market is coming back gradually and slowly. It is not 100% back yet, but there are signs of life and renewed vigor,” said James Wang, co-head of equity capital markets at Goldman Sachs Group Inc. in Asia ex-Japan.
A couple of nickel producers from Indonesia surged as they went public. And in Japan, as part of the country’s largest IPO since 2018, Rakuten Bank Ltd. soared after it raised 83.3 billion yen ($623 million). And KKR & Co.-backed Chinese liquor company ZJLD Group Inc. as recently as April 20th, priced Hong Kong’s largest offering in 2023.
Europe Wakes Up
Europe’s IPO market had been dragging, with activity in 2023 down about 12% from the same period last year as Russia’s invasion of Ukraine brought new listings to a screeching halt.
Also weighing on the market, poor IPO returns have been a deterrent for investors. Portfolio managers had been in the drivers seat insisting on bargains for less proven companies. In March the sudden meltdown of financial firm Credit Suisse, ignited a global market rout, this added to investor worries about interest rates and inflation; the event also made it less attractive for companies to try and attract a favorable price.
But there are growing signs of fear lifting. Most notably, Lottomatica SpA, the Italian gambling company backed by Apollo Global Management Inc., opened the books last week for a €600 million ($657 million) IPO, becoming the third large firm to tap European exchanges this year. Additionally, German web-hosting company Ionos SE and electric motor component maker EuroGroup Laminations SpA have managed to raise more than $400 million in the region, though both stocks have struggled after debuting.
U.S. Uptick
While IPO activity in the U.S. is not as robust, there has been a huge uptick as well. The IPO calendar for U.S. exchanges shows 20 priced deals totalling $751.5 billion, and 29 new filings. This is an acceleration after only $4.1 billion had been raised for companies listing on U.S. exchanges during the first two months of 2023.
Take Away
Globally companies are finding it more worthwhile to tap capital from the equity markets via IPO. While the most growth is greater Asia, Europe and the U.S. see a significant uptick as well. Whether this trend continues and represents, a buying opportunity seems to hinge on recession concerns. Many forecasters are now calling for a much more mild recession than previously expected.
Managing Editor, Channelchek
Sources: