Global IPO market: Investor appetite shifts from growth to value amid tighter liquidity

• Global IPO volumes fell 5%, with proceeds down by 32% year on year in Q3 2023
• Unicorn IPOs suffered a significant decline of more than 80% in volume and proceeds
• Despite subdued activity levels, the long-term outlook appears more positive, with rebound expected in 2024

Dublin, 5 October 2023: The first three quarters of 2023 recorded 968 IPOs (initial public offerings) globally with US$101.2b capital raised, representing a 5% decrease in volume and a 32% decrease in proceeds year-over-year as challenging market conditions continued to dampen activity. That’s according to the latest EY Global IPO Trends report for Quarter 3 2023.

However, market momentum is now building, with Q3 having witnessed a notable improvement in post-IPO share price performance compared with previous quarters. The global IPO market has also seen shifting dynamics featuring improved market sentiment in major Western countries, the prospect of high-profile US IPOs, robust emerging markets and a cooling China IPO market.

The technology sector continues to dominate global IPO activity in 2023. However, if excluding the blockbuster chip designer IPO, the entire sector would register a decline in proceeds. There hasn't yet been substantial growth in IPO debuts for artificial intelligence (AI) startups, but they are beginning to emerge in the IPO pipeline. Industrials moved into the second spot amid solid expansion across most of its subsectors. Unicorn IPOs, on the other hand, have experienced a substantial decrease in volume and proceeds of more than 80% YOY, notably in traditional growth sectors such as technology, and health and life sciences.

Fergal McAleavey, EY Ireland Head of Corporate Finance said: “IPO activity has faced a challenging 18 months globally and locally, with subdued conditions, a rising interest rate environment, the return of inflation and a geopolitical upheaval dampening market sentiment. It is not surprising therefore, that the volume and size of IPOs is down significantly as our latest EY Global IPO Trends Q3 report finds.

As we look into Q4 and beyond, however, there are reasons to be positive, with a number of significant global IPOs at the end of Q3 that have the potential to have a positive knock-on impact across the market, both for companies which perhaps had delayed their IPOs due to the economic headwinds, as well as those now moving into a position to tap the markets for investment.

“From an Ireland perspective, while there do not appear to be any IPOs coming to the market in the near term, the recent series of international IPO’s should lead to renewed confidence in the market. This should support the unlocking of local and international capital for investment and assist the scaling of indigenous companies.

“Faced with tighter liquidity and an elevated cost of capital, investors globally are more focused on companies with strong fundamentals, including a robust balance sheet and healthy cash flow and a path to profitability, rather than how fast the company can grow and how high the valuation could reach. In response, IPO candidates need to demonstrate their financial health and potential for value creation. An understanding of ESG concepts and the ability to embrace new technologies, most notably by harnessing the power and potential of Artificial Intelligence, into the business models and operations will be also be key.”

Overall regional performance: post-IPO share price has improved across regions

In the past decade, IPO numbers and proceeds from emerging markets have both increased by more than 30%, primarily due to faster economic growth compared to developed countries. Until this point of 2023, emerging markets accounted for 77% of the global share by number and 75% by value. They embraced new entrants to the active IPO arena, such as Turkey and Romania, in addition to the already thriving countries like Indonesia, Malaysia and India. In developed markets, the US witnessed a higher number of larger deals, while Japan and Italy contributed to the growth of smaller deals.

The Americas region has seen a strong 2023 so far, with a 159% increase in proceeds, raising US$19.3b, YOY for the initial three quarters of 2023, however it’s been a mixed picture for Asia-Pacific IPOs, with volume and proceeds down YOY by 8% and 41%, respectively, despite the region representing approximately 60% share of global market share. The EMEIA region saw 286 IPOs, which raised US$21.9b, a YOY increase of 2% in volume but a 44% reduction in proceeds.

EMEIA-based stock markets have adapted to a “new normal” amid tightening in financial conditions and market liquidity, yet stayed surprisingly robust and stable, with investors displaying increased confidence. A distinct trend in EMEIA is the growing interest in IPOs in the energy sector, along with environmental, social and governance (ESG) -related equity stories. 

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Notes to editors

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About the data

The data presented here is available on ey.com/ipo/trends. Q3 2023 refers to the third quarter of 2023 and covers completed IPOs from 1 July to 18 September 2023, plus expected IPOs by 30 September 2023 (forecasted as of 18 September 2023). Q3 2022 refers to the third quarter of 2022 and covers completed IPOs from 1 July to 30 September 2022. YTD 2023 or Q1-Q3 2023 refers to the first nine months of 2023 and covers completed IPOs from 1 January 2023 to 18 September 2023, plus expected IPOs by 30 September 2023 (forecasted as of 18 September 2023). All data contained in this document is sourced from Dealogic, Oxford Economics, and EY analysis unless otherwise noted. The Dealogic data in this report are under license by ION. ION retains and reserves all rights in such data. SPAC data are excluded from all data in this report, except where indicated.