Global IPO market treads water – three listings in Switzerland and prospect of increased activity

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• IPO activity in the second quarter at 310 IPOs worldwide, roughly the same level as last year, issue volume shrinks by five percent
• Europe with increased issue volume but fewer IPOs
• Investors continue to focus on companies in the technology sector and with sustainable business models
• Swiss Stock Exchange SIX with three listings of Chinese companies in the second quarter

Zurich, 29 June 2023 – Companies around the world remain cautious about
IPOs: A total of 310 companies worldwide ventured to go public in the second quarter - three percent fewer than in the equally rather weak prior-year quarter. The volume of issues also continued to shrink: by five percent to 39.0 billion US dollars.

In China, for example, the number of IPOs rose by 28 percent and the volume of issues by ten percent, while in Europe fewer companies ventured to go public: the number of IPOs fell by 27 percent to 33. However, the volume of issues climbed by 58 percent to 2.7 billion US dollars. In Switzerland, there were three listings in the second quarter. These are the results of the latest IPO barometer from the audit and consulting firm EY.

In the USA, too, there was growth - by 15 percent in the number of IPOs and by as much as 167 percent in the volume of issues. However, with 31 IPOs raising a total of 6.3 billion U.S. dollars, IPO activity remained at a relatively low level compared with the long term.

Technology companies accounted for ten billion of the global issue volume of 39 billion US dollars. In addition, three of the five largest IPOs in the second quarter were tech IPOs: the two Chinese semiconductors manufacturers Nexchip Semiconductor and SMEC raised 1.9 and 1.8 billion US dollars respectively, and the Chinese solar module manufacturer CSI Solar just under 1 billion US dollars. The largest IPO of the quarter took place in the United States: The consumer health division of the pharmaceutical group Johnson & Johnson achieved an issue volume of 4.4 billion U.S. dollars in its IPO under the name Kenvue.

Three Chinese companies with listings on SIX

There were no actual IPOs on the SIX Swiss Exchange in the second quarter of 2023, but there were three GDRs (Global Depository Receipts) listings. The three companies from China recorded a combined volume of around CHF 791 million. Zhejiang Supcon Technology Co Ltd, Yangzhou Yangjie Electronic Technology Co Ltd and Kunshan Dongwei Technology Co Ltd were the three companies to have their depositary receipts listed on SIX Swiss Exchange. This brings the total number of GDR listings of Chinese companies to be registered on SIX for the first half of the current year to 5.

"The global IPO market remains cautious due to geopolitical tensions and the interest rate turnaround," said Tobias Meyer, Head of Transaction Accounting and IPO Services at EY in Switzerland. "Companies are waiting and hoping for better investor sentiment and increased market liquidity." Nevertheless, Meyer is registering some movement in the market: "Volatility has decreased and price levels on the world's stock exchanges are relatively high." However, investors have become more selective in choosing investment targets due to the interest rate hikes, he says: "We have a buyer's market at the moment. That makes it all the more important for stock market candidates to be able to offer a high-quality equity story and to be able to demonstrate the sustainability of the business model and good corporate governance."

On the other hand, the economic uncertainty is having a braking effect, according to Meyer: "The economic recovery seems to be postponed further, further expected interest rate increases and the geopolitical tensions are creating uncertainty." This is causing the IPO market to fail to find a clear direction right now, as evidenced by the fact that numbers are largely flat year-over-year, Meyer said. "At the same time, the pipeline is growing - both in Europe as a whole and in Switzerland."

The European IPO market could recover if, the much-needed liquidity is restored, he said. But, "Investors will continue to be selective and focus on companies with solid fundamentals and a proven track record. Sectors that are attracting investor interest include technology and companies with ESG-related business models." Based on the signals in the Swiss market, Meyer expects IPO activity to increase over the course of the year.

Issuance of shell companies (SPACs) largely comes to a standstill

Worldwide, 13 SPACs with a total volume of 1.6 billion US dollars were newly issued in the first quarter. Compared with the same period last year, the volume of issues has thus shrunk by 52 percent, while the number of SPAC issues has actually fallen by 64 percent.

"There are hardly any new SPAC issues, the boom is over, and it didn't even arrive in Switzerland," Meyer notes. Due to the increased pressure, many SPACs are looking for suitable candidates for mergers, he says, and time is pressing to invest the collected capital sensibly within the term. In addition, the predominantly poor share performance of SPAC mergers is depressing investor sentiment.

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