Global IPO market activity
The global IPO market during Q1 2017 saw a considerable boost on the same period last year. Global IPOs stood at 369 for the quarter, up 92% on the same quarter last year, while the proceeds of the initial public offerings came in at $33.7 billion, 146% more than in the same period last year. The first quarter of this year has been the most active first quarter since 2007, when there were 399 IPOs whose combined proceeds stood at $47.5 billion.
The source of IPOs varied somewhat between financial sponsor-backed, former state owned enterprises and non-financial sponsor-backed. The former of these generated 39% of total proceeds in Q1 2017, even while only accounting for 10.3% of total deals. The reasons for the discrepancy is, in part, the result of two mega IPOs, Snapchat owner Snap, which had proceeds of $3.9 billion and Invitation Homes, which had proceeds of $1.8 billion. Non-financial sponsored-backed IPOs made up the larger chunk of the IPOs during the first quarter.
The regional share of IPOs has seen considerable change in recent years. In 2013 the Americas represented 31% of total deals and 46% of total deal value, while the EMEIA region generated 27% of total IPOs and 20% of proceeds. By 2016 the Americas generated 12% of IPOs and 17% of total proceeds, while the EMEIA region saw 28% of IPOs and 29% of proceeds. The decrease of activity in the US saw the share of activity primarily shifted to the Asia-Pacific region, which saw 60% of IPOs and 54% of proceeds in 2016.
The latest quarter has seen a considerable shift in proceeds, whose total in the Americas (37%) was close to that of 2014 (38%). The numbers do not give an accurate account in terms of volume as a % of total deals, with the large number of deals in the Asia-Pacific reflective of the Chinese government’s move to ok a large number of deals that have been in the pipeline since key market uncertainty across 2016.
The Americas IPO market
The Americas market saw 34 IPOs in the first quarter of the years, a jump of 143% on the previous year, while proceeds increased to $12.5 billion (up 1,392%) while median deal size saw an increase of 208% to $165.8 million. The large increase in deal size was partly reflective of the Snap and Invitation Homes mega deals. Deals were spread across a range of segments, with material recording the largest number of IPOs at 7, consumer products coming in second with 5 IPOs, while technology generate 4 IPOs. Deal activity remains subdued however, compared to 2013 and 2014,
Brazil generated 2 IPOs whose proceeds stood at $425 million, while Canada saw 4 IPOs with total proceeds of $137 million. The US was the largest contributor to total deal activity with 24 deals valued for a total of $10.8 billion.
EMEIA IPO market
Activity in the EMEIA region stood at 77 IPOs in the first quarter 2017, up by 8% on the same period last year, while deal proceeds came in at $5.2 billion, up ever so slightly (0.5%) on last year. The region’s main markets saw the largest number of proceeds at $4.8 billion in 34 IPOs, while the junior markets saw 43 IPOs with $403 in proceeds.
In terms of segment, consumer products recorded the largest number of IPOs at 10, for a total of $1.3 billion in proceeds. Financials followed, recording 9 IPOs with a total of $274 million in proceeds, while consumer staples recorded 9 IPOs totalling $136 million.
According the EY’s analysis, the region is likely to see increased IPO activity going into Q2, on the back of strong market fundamentals, a shift in focus in Middle Eastern economies away from oil, which may see one of the largest ever floats, while the low-interest rate environment continues to spur investors into deal seeking.
UK IPO market
The UK market remains subdued compared to 2014 and 2015. The results of the EU referendum created considerable uncertainties in the wider market, depreciated the pound and threw many deals into postponement. Deal activity was flat compared to a year previous on the London Main Market, recording 7 IPOs with total proceeds of $941.2 million. The London Aim market saw decreases in both number of deals 5, down 44%, and proceeds, $124.6 million, down 62%. Real estate, consumer products and energy all recorded 2 IPOs apiece.
The firm notes that continued uncertainty around exit negotiations, the weak pound, uncertainty in the US and wider market uncertainties, are likely to continue to subdue the IPO market in the UK. The volatile pound in particular, has created pricing difficulties, which means that a number of IPOs have been delayed until the end of the year, or early next year. PE-backed IPOs in particular are likely to be delayed, with firms having sufficient dry powder to wait on exiting portfolio companies through IPO in the UK until valuations are higher.
Jackie Kelley, EY Americas IPO Markets Leader, remarks about the UK market, “The first quarter of 2017 was one of the strongest for the US IPO market and established a solid runway for more deals for the remainder of the year. This positive performance should attract more tech and unicorns to the public markets and further open the door for other sectors such as retail, energy, and real estate. With the market currently insulated from the political uncertainty, more companies are expected to enter the filing process.”