IPO markets sluggish as uncertainty remains

The start of the 2019 IPO season has been slow. The first quarter saw around $20 billion raised across almost 200 deals. The London exchange saw its lowest deal activity in 15 quarters, on the back of political and geopolitical wait-and-see. Globally the story remains much the same, with a rocky start to the year seeing IPO activity falter. 

The global IPO scene seems to have enjoyed a relatively strong year in 2018, raising around $223 billion in around 1,200 deals. This was up slightly on 2017 and well above the most recent dip in 2016, at which point $145 billion was raised. Despite this, new analysis of European IPOs highlights deep seated uncertainties have impacted the market going into 2019.

PwC’s latest IPO market watch edition shows that Q1 2019 has been the slowest since Q3 2016 in terms of value for London, with three public offerings – Schiehallion Fund raised £361 million, followed by DWF Group at £95 million and Diaceutics at £21 million. In total just under £560 million was raised in London.

The report mirrors findings from the same period last year, when IPO activity was found to be slowing, in part on the back of market uncertainty at the start of the year. 2018 saw the Americas have a relatively strong showing, reflecting a number of mega-IPOs, such as PagSeguro Digital, which raised $2.3 billion, and ADT, which raised $1.5 billion. UK markets were relatively flat, however, something broadly blamed on the uncertainties companies face amid the Brexit process.

12 months later, this stagnation has clearly spread to the European market, and there have been a meagre five deals closed in 2019’s first quarter, down from 25 deals in the same period in 2018. This represents the lowest in more than 15 quarters, with the last quarter to see such slow activity in 2016, when in Q3 nine deals were closed. According to PwC, until there is clarity on the geopolitical landscape of the UK, deal activity will likely remain dampened, thanks in part to London’s status as a key player in the region.

The analysis shows that now only the UK saw a relatively slow period to start off 2019. Europe as a whole was noted for a total of 32 IPOs, raising around €6 billion in total. Compared to the same quarter in 2018, when a total of 69 deals were closed with total value in excess of €13.1 billion, 2019 is anaemic. This is noted relative to even longer-term trends, which show that the only comparatively close Q1 in the past seven years was 2013, when 44 deals valued at €3.5 billion were closed.

Value falls

2019 was off to a slow start in Q1, raising just $19 billion in 173 deals. The slow start reflects wider market uncertainties in the face of the trade war between the US and other global powers, Brexit and investor hesitancy in the face of uncertainty. However, Q2, so far, saw one of the largest ever IPOs, with Uber going public – which is set to significantly pad the 2019 numbers in terms of value raised.

When compared to other recent quarters, value also fell. Q1 2019 has the lowest volume and value in the past 16 quarters. Again, the most recent relatively close slow quarter was Q1 2016, when there were just 52 deals raising €3.7 billion.

Lucy Tarleton Director, UK Capital Markets Group at PwC, commented,  “London remains an attractive listing destination and we are watching the market closely as investors have cash to deploy despite the uncertainty. There are certain pockets of activity but generally we expect the current situation to continue until companies have greater clarity on the future geopolitical landscape.”