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

• Global IPO volumes fell 5%, with proceeds down by 32% nine-month YOY
• Emerging markets made up 77% of the global share by number and 75% by value; Asean’s IPO market remained robust
• YOY, unicorn IPOs suffered a significant decline of more than 80% in volume and proceeds

Globally, the first three quarters of 2023 recorded 968 IPOs with US$101.2b capital raised, a 5% and 32% decrease year-over-year (YOY), respectively. Despite this, market momentum is building, with Q3 having witnessed a notable improvement in post-IPO share price performance compared with previous quarters. Three quarters into 2023, the global IPO market has 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. These and other findings are available in the EY Global IPO Trends Q3 2023.

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 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 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 classic growth sectors such as technology, and health and life sciences.

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

The initial nine months of 2023 present a mixed picture for Asia-Pacific IPOs, with volume and proceeds down YOY by 8% and 41%, respectively, even though the region presents an approximate 60% share of global market share. Governments across most of the region are trying hard to stimulate economic growth and IPO activity through initiatives such as reducing stamp duty taxes. Also, due to softness in key markets, Asia-Pacific saw fewer deals the past two years. There is general optimism over large deals in the pipeline, with an expected modest uptick in IPOs next quarter or early 2024.

Across Asean, the IPO market remained robust, with a total of 125 deals raising US$5.1b year-to-date (YTD), up from 106 deals raising US$4.3b during the same period in 2022. Asean exchanges that were most active YTD were Indonesia (68 IPOs raising US$3.5b), Thailand (26 IPOs raising US$837m), Malaysia (25 IPOs raising US$698m). YTD, the Philippines and Singapore each saw three IPOs on their exchanges, raising US$74.6m and US$21.1m respectively.

Chan Yew Kiang, EY Asean IPO Leader says:

“Asean exchanges have performed commendably in the IPO market this quarter. Tighter liquidity, higher costs of capital and the maturity of growth companies in the region should drive continued interests to tap on the capital markets to fuel development and expansion. Companies in Asean should continue to navigate market uncertainties with agility and innovation, establish robust governance framework and demonstrate resilience. IPO aspirants that can demonstrate a path to profitability, long-term value and sustainability considerations will be in a good position to capture investor interest.”

The Americas region saw an outstanding 159% increase in proceeds, raising US$19.3b, YOY for the initial three quarters of 2023. Out of the 113 IPOs this year, 96 of them stemmed from the US. The US is also the only market that has attracted more cross-border IPOs and is welcoming long-awaited blockbuster IPOs. Special purpose acquisition company (SPAC) IPO activity thus far in 2023 has hit a seven-year low in terms of proceeds, and is down to levels not seen since in 2016. While the traditional IPO market show signs of recovery, SPAC IPO activity is likely to be muted in the near term as the focus shifts to completing or unwinding those yet to de-SPAC.

Since the start of the year, EMEIA 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. 

Q4 2023 outlook: new interest rate environment

George Chan, EY Global IPO Leader, says:

“Faced with tighter liquidity and a higher cost of capital, investors are turning to companies with strong fundamentals and a path to profitability. In response, IPO prospects need to demonstrate their financial health and potential for value creation. As valuation gaps narrow, investors are reviewing the post-listing performance of the new cohort of IPOs, which, if positive, could renew market confidence.”

Across major Western economies, interest rates are forecast to stay high, as central banks try to bring persistent inflation down to target levels. Consequently, the cost of capital remains elevated, which, along with tighter credit, makes financing more challenging. 

Investors will continue to care more about the fundamentals such as a strong balance sheet, healthy cash flows and resilience amid weak economic conditions rather than how fast the company can grow and how high the valuation could reach. Investors are also likely to be more interested in companies with an ESG concept and those that can demonstrate the adoption of AI application into the business models and operations.

IPO candidates will need to be agile with innovative business models, be resilient when facing supply chain constraints and macroeconomic challenges, have strong working capital and be able to adapt to new ways of doing business by embracing technology and AI applications.

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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.