Lackluster US and China slow technology IPO market

30 November 2015

Q3 2015 saw 11 technology IPOs, of more than $40 million, globally, with total proceeds hitting $4,093 million. The number represents a considerable decrease in activity relative to previous quarters – although in line with recent trends for Q3. Japan and Europe both saw three IPOs, while recent troubles on the Chinese exchanges have dampened enthusiasm for IPOs, with just two booked in the country.

In recent report by PwC, titled ‘Global Technology IPO Review Q3 2015’, the accounting and consulting firm reviews the Q3 technology Initial Public Offering (IPO) market, focusing on IPOs with an issue size greater than $40 million. The report is based on the S&P Capital IQ database industry classifications of technology, and covers IPOs in Internet Software & Services, IT Consulting & Services, Professional Services (e.g., Application Software, Software Solutions), Semiconductors, Software, Computers & Peripherals, Electronic Computers Manufacturing and Communications Equipment.

Q3 2014 - Q3 2015 Global technology IPO trends

Global technology IPO trends
IPOs within the global tech sector have seen considerable declines in the third quarter of this year, with 11 companies going public, raising $4.1 billion. In comparison, in the same quarter last year, 18 companies went public, raising $24.8 billion. Compared to the previous quarter, proceeds declined 34% and the number of offerings fell by 69%.

One of the major reasons for the sharp decrease in IPOs in Q3, besides the normal summer slowdown, is, according to the authors, the lackluster numbers within the Chinese economy – cascading through the exchanges, leading to spectacular decreases in market cap, impacting IPO plans – as a result only two Chinese technology IPOs occurred within the past quarter.

Q3 2015 global tech IPO trends

Average tech IPOs
The average proceeds have stayed relatively stable compared to Q3s in previous years. Q3 2015 had an average IPO value of $186 million, up from last year’s $112 million and 2013’s $90 million. Total proceeds stood at around $4 billion, while down considerably on last year’s $24 billion, are up compared to 2011, 2012, and 2013 which saw around $1.5 billion, $1 billion and $1.2 billion respectively.

Global technology IPO trends

9 months year-on-year
A total of 70 technology companies went public in the first nine months of 2015, more than the number of IPOs in the full year of 2013 as well as nine-month totals for 2011 and 2012 too. The total proceeds raised in the first nine months of 2015 was $16.3 billion, a 179% increase from the same period in 2013. Technology IPO results in 2014 were however heavily skewed by the third-quarter mega IPO of Alibaba ($21.8 billion).

year-over-year comparison by geography

Geographic distribution
Japan led the world in tech IPOs in Q3 recording three offerings and proceeds of $759 million. Europe too saw three IPOs, one in Germany and two in the UK (Kainos Group and Gloo Networks). Proceeds in Europe increased significantly on last year’s $59 million (to $1.6 billion), due for the most part to German Scout24’s mega IPO. China’s two IPOs for around $1.4 billion pale in comparison to the value generated by Alibaba last year.

Q3 2015 IPO subsector distribution

Sector distribution
In terms of IPO proceeds by sector, Internet and Software Services (Scout24 AG and Itokuro) lead the pack, with two deals earning almost $1.6 billion in proceeds, followed by Communications equipment, where one IPO, China Railway Signal & Communication Corporation, raised $1.4 billion when it came to market. The most IPOs took place in Software, although the proceeds generated only $289 million. Semiconductors was the category with the lowest proceeds (in which there was an IPO).