Global IPO market had best performing Q2 in 20 years, EY report says

Global IPO activity had its best performing second quarter in two decades by volumes and proceeds, Ernst & Young Global Ltd said in its latest report and expects the momentum to continue for the second half of the year.

Amid a robust performance in global equity market and ample liquidity, traditional IPOs stepped back into the forefront in the previous quarter after the first was dominated by SPACs, the British professional services giant found.

In the first half of 2021, there was a total of 1,070 IPOs raising $222 billion in proceeds, with annual increase of 150% and 215%, respectively.

“IPO-bound companies wanting to take advantage of favorable market sentiment and high liquidity were keen to complete their transactions before an expected mid-year slow-down,” Paul Go, EY Global IPO Leader, said in the report.

“Companies considering an IPO should prepare multi-pronged strategies that demonstrate resilience against geopolitics, the evolving COVID-19 pandemic situation, valuations and governance challenges.”

The report said the U.S. SPACs have tailed off in the second quarter after a high level of activities for the past 12 months, while European SPAC IPO grew totalling to 21 SPAC IPOs through the first half of the year.

In the first half, there were 276 IPOs across the Americas, raising $93.9 billion, while the Asia-Pacific region saw 471 IPOs for total proceeds of $74.3 billion.

The EMEIA (Europe, the Middle East, India, and Africa) region was the fastest growing IPO market year-on-year, fueled by strong bull run in equities markets, with 323 IPOs, raising $53.8 billion.

“A spectacular bull run in equities markets in H1 2021 led to quadruple the number of IPOs and five times the proceeds year on year, we are beginning to see a return to normal in terms of IPO activity,” said EY EMEIA IPO Leader Martin Steinbach.

“This is backed by positive momentum and investor sentiment, high liquidity in the markets looking for returns and an improved economic outlook. Moreover, a merger with a SPAC is becoming an alternative path for IPO-bound companies to go public.”

The UK also saw a sharp increase in IPO volumes and proceeds caused by a pent-up demand from the past 18 months as the country moved passed elections, Brexit and the COVID-19 pandemic, resulting in 43 IPOs raising $12.7 billion, with 975% and 385% year-on-year growth respectively.

The technology sector has led all other by number of deals accounting for 27% of all global IPOs in the first half of the year. The sector has recorded the highest number of listings marking a fourth successive quarter, with 284 deals raising $90.2 billion.

The healthcare followed the tech completing 187 deals raising $33.4 billion and industrials tailed with 140 IPOs raising $24.3 billion.

EY analysts expect the IPO market to uphold its strong impetus in the second half amid favorable market conditions but said there are still lingering fears.

“A steady pipeline of $1 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,” the report said.

“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.”

Picture Credit: Business Today