EY has released its latest data on IPO completed from the beginning of the year to June 2021 encapsulating all global listings that took place in that 6 month period. The figures were astounding, as it showed the IPO momentum from end last year spilled into this year resulting in the most active second quarter by deal numbers and proceeds in the last 20 years.
Based on the data, while the first quarter was dominated by special purpose acquisition company (SPAC) IPOs, traditional IPOs stepped back into the spotlight in Q2 helped by a number of factors including ample liquidity in the financial systems and strong global equity market performance among others. Through first half 2020 there was a total of 1,070 IPOs, raising US$222b (RM910 billion) in proceeds, increasing 150% and 215%, respectively, year-on-year.
The consulting firm states that the positive performance of the global IPO market indicates global economic recovery is well underway, although the pace of recovery varies across markets. While SPACs continue to be a hot topic, US SPACs have stepped out of the driver’s seat through Q2 after a high level of activity for the past 12 months. At the same time, European SPAC IPO activity grew, totaling 21 SPAC IPOs through 1H 2021.
USA lead in listings with 276 IPOs raising US$93.9b (RM400 billion) in Asia-Pacific region, IPO activity remained steady with 471 IPOs raising US$74.3b (RM303 billion). On the heels of a strong bull run in EMEIA equities markets, IPO activity in the region through 1H 2021 surged, resulting in 323 IPOs raising US$53.8b (RM220 billion) EMEIA recorded the highest growth rates year-on-year among the three regions.
In terns of industry, technology has led the sectors by deal number, accounting for over a quarter (27%) of all 1H deals with 284 IPOs raising US$90.2b (RM360 billion). The health care sector followed, accounting for 17% of 1H 2021 IPOs with 187 deals followed by industrials which saw 140 IPOs.
According to Paul Go, EY Global IPO Leader, IPO-bound companies want to take advantage of favorable market sentiment and high liquidity before an expected mid-year slow-down. He said companies considering an IPO should prepare multipronged strategies that demonstrate resilience against geopolitics, the evolving COVID-19 pandemic situation, valuations and governance challenges.
Outlook for the rest of the year continues to be rosy, companies looking to go public will be taking advantage of favorable conditions. A steady pipeline of US$1b+ RM4 billion +) IPOs is expected through the year including tech unicorns, SPACs and companies in sectors that have already proved resilient like technology and health care despite the COVID-19 pandemic. On the flip side, 2H 2021 may prove challenging as the lingering impacts of the COVID-19 pandemic continues to affect companies in sectors most impacted by national lockdowns – such as traditional retail, travel, tourism and hospitality. If these sectors fail to recover, global markets will continue to fall short of a full global economic recovery.
Regardless of sectors, those companies should be well-prepared with a realistic vision of valuations while making certain to have an environmental, social and governance (ESG) strategy in place that is already part of their purpose, strategy and culture.
