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How do you steady the course of your IPO journey in a changing landscape?

Q1 2024: major shift in global IPO market share from the past five years.

In brief

  • In Q1 2024, global IPO volumes fell 7%, but proceeds were up 7% year-over-year (YOY).
  • An improvement in valuations and pricing levels reflects growing confidence among both issuers and investors.
  • Momentum is building for private equity (PE)-backed IPO exits in 2024, with Q1 2024 average deal size up 26% from 2023.

The year kicked off on a cautiously optimistic note, marked by a selective thaw following a period of dormancy. The Americas and EMEIA IPO markets had a bright start in 2024, pushing global IPO proceeds up by 7%. However, the global IPO activity by number continued to display a 7% YOY decline, weighed down by the usually energetic Asia-Pacific region. For Q1 2024, the global IPO market saw 287 deals raising US$23.7b. These and other findings are available in the EY Global IPO Trends Q1 2024, a quarterly report analyzing global IPO data to determine market trends and outlook for the year ahead.



Over the years, the IPO landscape has witnessed a shift in valuation expectations between buyers and sellers. On the one hand, sellers have lowered their expectations toward valuations as they come to terms with the reality of the market’s aptness to align value in a tight money environment. On the other hand, stock markets in some major economies are booming as investors are pricing in the potential reduction of interest rates. As the landscape evolves, there is an increasing hope for the valuation gap to narrow between buyers and sellers.

In Q1 2024, a majority of key IPO markets saw a significant number of newly listed companies’ current stock prices surpassing their offer prices. This trend could indicate an improvement in valuations and pricing levels, reflecting growing confidence among both issuers and investors. Japan has seen a notable increase thanks to its stock market providing a more conducive environment for IPOs. Both Europe and the Middle East have also experienced enhanced IPO returns. Meanwhile, the US, ASEAN and India have maintained a stable trend compared to the preceding quarter.

Industrials, consumer and technology sectors were the top three IPO sectors by number and demonstrated the most significant improvement in after-market performance compared to Q1 2023. Conversely, the financial sector witnessed a substantial decrease in the number of well-performing IPOs, primarily due to the lackluster performance of small-scale offerings from countries that either experienced stagnant or deteriorating post-IPO market conditions.


An IPO is one of the pinnacles of achievement for PE firms, serving as a public showcase of their acumen and a defining milestone in their growth journey. Despite a downturn in IPO exits over the past two years, as dealmakers retreated from IPO transactions due to various macroeconomic and geopolitical factors, global IPOs have garnered on average over 40% higher EV/EBITDA multiples on IPO exits than strategic acquisitions or sponsor sales. With global inflation continuing to fall and central banks’ pivot toward interest rate reductions, the IPO-exit climate for 2024 seems poised to stabilize with two-thirds of PE firms predicting a rise in IPO-exit activity this year.

In Q1 2024, approximately 10 PE-backed IPOs came to the market, five of which were among the top ten global IPOs, a testament to their significant market presence. This prestigious group included Douglas AG from Germany and Brightspring Health Services from the US. The median deal size of PE-backed IPOs in Q1 2024 surpassed those listed in Q1 2023 by 26%. Meanwhile, the median post-IPO valuation for PE-backed IPOs outpaced the valuations of both VC-backed and non-financial-backed IPOs by a substantial 2.5 times and a staggering 31 times, respectively. This outperformance, coupled with a projected rise of IPO exit activity by PE firms, indicates that the momentum for PE firms to capitalize on the IPO market is rapidly gaining traction in the early months of 2024.


The artificial intelligence (AI) vertical is experiencing significant growth in the private realm, with the majority of AI and AI-associated businesses still in the seed or early stage of venture capital (VC) rounds. These companies, mostly from the US, cover a broad spectrum of sectors, not confined to technology but encompassing health and life sciences, consumer products and other sectors. The quantity of these companies in seed and early-stage VC rounds vastly exceeds those in the late stage of VC rounds or private equity phase, which exemplifies where AI and AI-related firms are developing within the private runways. It suggests potential for a wave of IPOs in future years as these companies reach maturity and seek to leverage public markets for further growth.

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The full EY Global IPO Trends Q1 2024 report provides deeper analysis and insights.

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Overall regional performance: Americas and EMEIA IPO markets recovering and Asia-Pacific market plunging

 

The global IPO market has experienced significant shifts in geographical composition, driven by ongoing macroeconomic and geopolitical dynamics. 

 

The Americas continued to exhibit strong performance in IPO activity compared with both the previous quarter and Q1 2023, with 52 deals and US$8.4b in proceeds, up 21% and up a whopping 178%, respectively, YOY. Each of the top seven deals in Q1 2024 raised over US$500m, versus just one in Q1 2023. After experiencing a 20-year low in IPO proceeds in 2022, the US has finally witnessed a noticeable uptick in the first quarter of the year, riding on the wave of the market rally from last year. 

 

Driven by a subdued IPO market sentiment across the region, Asia-Pacific IPO activity in Q1 recorded 119 deals and US$5.8b in proceeds, down 34% and 56% YOY, respectively. This decline was especially sharp in Mainland China and Hong Kong, with the number of deals decreasing more than half and deal size falling by nearly two-thirds. Both markets have experienced a consistent decline in IPO activity over the past few years. Japan was the only market in Asia-Pacific to see a slight increase in deal count in the first quarter, with the Nikkei Index hitting an all-time high in February.

 

The EMEIA IPO market witnessed an impressive growth at the start of the year, launching 116 IPOs totaling $9.5b in the first quarter, up 40% and 58% YOY, respectively. This surge is attributed to larger average deal sizes from IPOs in Europe and India, which enabled EMEIA to maintain first place in global IPO market share by proceeds since Q4 2023. Since 2019, India has rapidly gained prominence, particularly in the number of IPOs, and has now emerged as a standout performer.


Q2 2024 outlook: capitalizing on fleeting windows amid heightened uncertainties  

“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. To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts," says George Chan, EY Global IPO Leader.

The IPO market thus far in 2024 has shown signs of vigor, with an upswing in IPO activity. Despite the restrained overall market activity in previous years, there’s an uptick in enthusiasm from both IPO issuers and investors, hinting at shifting market dynamics and a more welcoming landscape for public listings.

The global economy will remain on a soft growth trajectory in 2024, with developed markets likely to see modest growth while emerging markets stay on a firmer growth path. Stock markets in various major economies are already pricing in the expectation of interest rate cuts.

Just as investors and IPO candidates adapt to the new norm of higher interest rates and reduced liquidity, they will also need to navigate through additional layers of complexity in the geopolitical and global election landscape in the IPO market. As elections amplify uncertainty, IPO candidates will need to closely monitor election outcomes and assess how specific policies could affect stakeholder interests and re-evaluate their IPO strategy and timing as necessary.  

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Summary

The global IPO market has shifted in geographical composition, as a result of ongoing macroeconomic and geopolitical dynamics. There is improving alignment between buyers’ and sellers’ valuation expectations. Private equity-backed IPO exits are building in momentum. The growing AI vertical indicates a possible surge of IPOs in future years.

Companies considering an IPO in 2024 should focus on thorough preparation, considering factors like inflation, interest rates, elections, geopolitical tensions, AI implications and the ESG agenda. They need to show high-quality equity stories, demonstrate strong fundamentals and manage price expectations to prepare for fleeting IPO windows in 2024.

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    Photographic portrait of George Chan
    George Chan
    EY Global IPO Leader; EY Greater China Assurance COO
    Passionate about helping clients excel in this transformative age. Keen reader. Movie fan.

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