The global market for initial public offerings (IPOs) is showing signs of life as a rebound in the stock market has emboldened companies to test investor appetite for new listings, particularly in Asia.
However, a full-fledged recovery looks distant.
IPOs totaling about US$25 billion were launched last month and this month, nearly twice the amount seen in the first two months of the year, when listings virtually ground to a halt.
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Issuers from Hong Kong to Italy saw a window of opportunity with the decline in market volatility, analysts said.
Activity was particularly buoyant in Asia, where regional exchanges accounted for nearly 80 percent of new share sales this month. Listings in Europe also picked up.
However, concern about a recession has deterred US issuers, slowing a full-fledged recovery. Average deal sizes were smaller, and the money raised so far this year remains 51 percent below the same period last year.
“We are beginning to see green shoots of activity with companies restarting processes that were on hold, but there is still a fair degree of uncertainty in the market,” said Jason Manketo, global cohead of law firm Linklaters LLP’s equities practice. “The buy side is keen to see results for a couple of quarters before committing to an IPO. This means the potential pipeline of some 2023 deals has been moved out to 2024.”
Drilling down into the data, Asia is handily the busiest area for offerings in the world right now, but in a key change compared with last year — when the vast majority of large deals were concentrated in China — issuance is coming from a broader swath of Asia this year.
Indonesia has been the brightest spot with a pair of nickel producers surging in their debut.
Rakuten Bank Ltd soared after raising ￥83.3 billion (US$620.9 million) in Japan’s largest IPO since 2018 — although, the pop came after the initial price range had been cut.
KKR & Co-backed Chinese liquor company ZJLD Group Inc (珍酒李渡集團) on Thursday priced Hong Kong’s largest offering this year.
“The IPO market is coming back gradually and slowly. It is not 100 percent back yet, but there are signs of life and renewed vigor,” said James Wang (王亞軍), cohead of equity capital markets at Goldman Sachs Group Inc in Asia excluding Japan.
Europe’s IPO market has been moribund, with this year’s activity down about 12 percent from the same period last year, when Russia’s invasion of Ukraine brought listings to a screeching halt.
Poor IPO returns have been a major deterrent for investors. Portfolio managers have been driving hard bargains on valuations and refusing to pay top dollar for new, unproven companies.
Meanwhile, the sudden meltdown of Credit Suisse Group AG, which ignited a global market rout last month, has added to investor worries about interest rates and inflation, further muddying listing plans.
However, there have been signs of gloom lifting. Most notably, Lottomatica SpA, an Italian gambling company backed by Apollo Global Management Inc, opened books last week for a 600 million euro (US$665.8 million) IPO, becoming the third large firm to tap European exchanges this year.
Additionally, German Web-hosting company Ionos SE and electric motor component maker EuroGroup Laminations SpA have each raised more than US$400 million, although both stocks have struggled after debuting.
Still, the outlook for IPOs in the US remains challenged. Only US$4.1 billion has been raised for companies listing on US exchanges this year, with just three — Nextracker Inc, Atlas Energy Solutions Inc and Enlight Renewable Energy Ltd — accounting for one-third of that amount.
Outside that cluster and a dozen special purpose acquisition companies that have debuted this year, the vast majority of new listings would be qualified as penny stocks.
“We’re still in an uncertain world and uncertainty is the worst thing for new issuances,” Rainmaker Securities LLC cofounder Greg Martin said.
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