Over the last nine months, the number of initial public offerings (IPOs) announced worldwide has dropped by 5%, and the revenue associated with them has shrunk by as much as 32%. During the first three quarters of 2023, 968 new IPOs were recorded, raising capital amounting to $101.2 billion. Emerging markets hold as much as 77% share in the global IPO, generating three-quarters (75%) of global income.
Since the beginning of the year, 286 new IPOs have taken place in the EMEIA region (Europe, Middle East, India, and Africa), raising capital worth $21.9 billion. This represents a 2% annual increase, but the associated revenue fell by as much as 44%.
For comparison, in 2023, eight companies debuted on the main market of the Warsaw Stock Exchange S.A as a result of transitioning from the New Connect market. The EY research methodology does not, however, include these types of debuts in its compilation.
Despite the year-on-year decrease in new IPOs and the associated revenues by 5% and 32%, respectively, the dynamics of this market are growing, and a significant improvement in the prices of issued shares was noted in the third quarter compared to previous ones. This is influenced by expected significant stock market debuts in the United States and a good situation on world markets. It is predicted that interest rates will remain at elevated levels in all major western economies as central banks are trying to bring persistent inflation back to target levels. As a result, the cost of capital will remain high, coupled with limited access to credit, making financing company development increasingly challenging – such are the conclusions of the EY Global IPO Trends Q3 2023 report.
Investor Confidence and Optimism are Growing
According to the EY report, stock markets in the EMEIA region have solid foundations, proving to be stable despite lower liquidity and higher capital raising costs which investors place relatively high trust in. A clearly visible trend is the growing interest in IPOs, mainly in the energy sector, but also: environmental protection, social policy, corporate governance, and ESG.
Investors worldwide, including in Poland, are guided by not only the prospect of making quick profits, growth potential, and the current valuation of stock exchange companies, but are interested in and trust companies which have in practice adopted the ESG concept, and those that can demonstrate effective application of AI in practiced business models and operations. Therefore, companies planning an IPO should be innovative, resilient to supply chain threats, prepared to meet macroeconomic challenges, and have strong working capital as well as being able to adapt to new ways of doing business through effective use of the latest technology and artificial intelligence applications – said Anna Zaremba, EY Partner.
According to the EY report, despite global declines, the Americas region noted an extraordinary revenue rise of 159%, raising capital worth $19.3 billion in the first three quarters of 2023. Of the 113 IPOs realised there this year, 96 took place in the United States. But Asia and the Pacific region showed decreases in the number of IPOs and associated revenues by 8% and 41% respectively and recorded fewest transactions in the last two years. Despite this, there is ubiquitous optimism with significant transactions underway and a modest increase in the number of IPOs expected in the next quarter or early 2024.
The Technology Sector Returns to Investor Favor
The report also indicates that in 2023, global activity in the IPO market was dominated by the technology sector. However, this would not have happened without the issuance of shares by one of the chip designers. Without this, the entire industry would have recorded a decrease in revenue. The industrial sector took second place due to expansion in most of its subsectors. There was no significant increase in stock market debuts among startups investing in Artificial Intelligence (AI), but these are just starting to prepare processes related to entering the stock market.
The largest year-on-year drop in the number of IPOs and associated revenues – by over 80% – was noted particularly among unicorns operating globally in sectors such as technology and health and life sciences.
