Global IPO market activity is slowing but expected to pick up in the second quarter of 2019

Aurel Dragan 29/03/2019 | 13:59

Global IPO activity declined in Q1 2019, against the backdrop of permanent geopolitical and commercial uncertainties. Technology, health and industry were the most active sectors in the first quarter of 2019 and an increase in trading activity is expected in the second quarter of 2019, with the dispersion of uncertainties.

Despite the positive performance of major stock indices and a decline in volatility in many markets, geopolitical uncertainties and current trade disputes continue to cushion investor enthusiasm. As a result, the number of initial public offering (IPO) in the first three months of 2019 declined to 199 globally, amounting to USD 13.1 billion, marking a 41 percent decrease in transaction volume and 74 percent value of subscriptions.

The technology, health and industrial sectors were the most prolific, with initial public offerings in the first quarter of 2019 cumulating 101 IPOs (51 percent of total IPO transactions), totaling USD 5.4 billion (42 percen of the capital attracted globally). According to the attracted capital value, technology is ranked first, with USD 2.1 billion (16 percent of global capital), according to the quarterly EY Global IPO trends: Q1 2019.

 “The dense cloud of current geopolitical tensions, trade disputes between the US, Europe and China, as well as the uncertainty of how the United Kingdom will leave the European Union, have softened IPO activity in all regions. In the II quarter of the year, there is a need for a single IPO megatranzation or a “unicorn” of the initial pending public offerings for the mist of uncertainty to disperse and for global IPO markets to recover in the second half of 2019,” said Dr. Martin Steinbach, coordinator of EY Global and EY EMEIA IPO

IPO activity in the EMEA region slowed by Brexit

In the EMEA region, the volume and value of transactions dropped substantially from the first quarter of 2018, with stock exchanges in the region accounting for only 42 IPO transactions totaling USD 1.4 billion in the first quarter of 2019. But although the first quarter 2019 was an exceptionally weak quarter, those EMEA IPO transactions that were launched on the main markets posted 4 percent returns on the first day and current returns of approximately 46 percent, which gave investors a positive attitude IPO.

In Europe and the United Kingdom, the uncertainty generated by Brexit continued to negatively affect IPO markets, and the risk of slow growth in European economies made only 23 companies launch public offerings worth a total of USD 0.4 billion.

The largest EMEA IPO transactions in the first quarter of 2019 took place on the Indian National Exchange, accounting for 94 percent of India’s total underwritings and 66 percent of total IPOs in the region in the first quarter of this year. However, a liquidity crisis among non-bank lenders caused a correction of the Indian stock exchange in the fourth quarter of 2018, which continued to affect the IPO activity in the first quarter of this year.

Cross-border IPO activity remained at 2018 levels, accounting for 9 percent of the IPO activity of EMEA companies in the first quarter of 2019.

US IPO markets quieter

IPO activity in US markets fell steeply in the first quarter, with the value of subscriptions decreasing by 83 percent to USD 3.3 billion, and the volume of transactions dropped by 44 percent to 31 IPOs, compared to the first quarter of the year 2018.

In the US, 65 percent of IPO transactions in US markets (20), which accounted for 92 percent of subscriptions (USD 3 billion), took place in the US. However, in the United States, market volatility has made foreign issuers decide to postpone their listings. Only four international IPO transactions were listed in the US in the first quarter of this year, compared to 15 companies listed in the same period of the previous year.

NASDAQ ranked second in the world rankings of the scholarships on the basis of subscriptions in the first quarter of 2019, which amounted to USD 2.5 billion or 19.1 percent of global underwritings, while the Canadian Stock Exchange Toronto Main Market and Venture Exchange registered 5 IPO transactions worth a total of USD 188 million, and a USD 68 million real estate IPO transaction in Chile.

Trade tensions in the Asia Pacific region

Acalmia also included IPO activity in Asia-Pacific markets in the first quarter of this year, dominated by global economic uncertainties and geopolitical issues. In particular, current trade tensions between China and the US have had a strong impact on the attitudes of the markets, and the region has experienced a 24 percent decline in transaction volume (126) and 30 percent in value of transactions (USD 8.4 billion) from the first quarter of 2018.

However, the Asia-Pacific region continued to dominate IPO activity globally in the first quarter, accounting for 63 percent of the volume of IPO transactions and 64 percent of its global value. This region was represented by eight of the top 10 scholarships according to the number of transactions and six of the top 10 scholarships according to the value of global transactions. The Hong Kong Stock Exchange ranked first, both in terms of volume and value of transactions in the top 10 global stock exchanges.

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