KUALA LUMPUR (April 10): The global initial public offering (IPO) market recorded 299 listings in the first quarter of 2023 (1Q2023), down 8% year-over-year (y-o-y). A total of US$21.5 billion (RM94.8 billion) was raised, a 61% y-o-y decline, amid interest rate rises, a lukewarm stock market, entrenched inflation and unexpected global banking industry turbulence, according to Ernst & Young (EY) in its latest Global IPO Trends 1Q2023 report.
"Despite this ongoing uncertainty around the economic and geopolitical environment, IPO pipeline continues to build and hope remains for a turnaround later this year," it said in a statement on Monday (April 10).
The report showed that technology companies, which have been a mainstay of IPO activity in recent years, experienced some sharp declines in valuations and the turmoil in the crypto markets and the global banking industry has not helped.
"While technology continued to lead in IPO volume, four of the top 10 listings in 1Q2023 were in the energy sector," said EY.
Although the Asia-Pacific IPO market accounted for 59% of global IPO deals in 1Q2023, its activity declined 6% y-o-y to 175 deals and plummeted 70% y-o-y to US$12.7 billion by proceeds.
EY said despite the lifting of almost all its Covid-19 pandemic control measures earlier this year, the China market was a bit quieter than usual, accounting for more than 40% of all global IPO proceeds.
"Hong Kong was uncharacteristically quiet. Overall, Asia-Pacific, took a 'wait and see' attitude as investors keep their powder dry and look for further indicators of market recovery," said EY.
Malaysia's IPO market is third most active in Southeast Asia
IPO activity across Southeast Asia appeared encouraging in 1Q 2023, with 51 deals raising US$1.4 billion in proceeds, up from 29 IPOs raising US$1 billion in 1Q2022.
EY noted that Indonesia was the most active during the quarter, with 30 IPOs raising US$828 million, followed by Thailand with 10 IPOs raising US$322 million, Malaysia (10 IPOs raising US$238 million) and Singapore (one IPO raising US$15 million).
SPAC IPO activity hit six-year low in 1Q2023
In 1Q2023, special purpose acquisition company (SPAC) IPO activity hit a six-year low in terms of volume, with proceeds also down to levels not seen since 2016, said EY.
"As market conditions remain challenging and many promoters of SPACs listed in early 2021 need to complete or unwind their transactions, SPAC IPO activity is likely to be muted in the near term," it added.
'Investors prioritising value over growth'
EY said in a highly unpredictable and persistent inflationary environment, investors who were previously oriented toward funding growth and potential are now more focused on the path to profitability and cash flows.
"Collaboration between governments, including cooperation and stock-connect programmes, along with investor appetite for diversity, could also lead to a wave of dual listings and cross-border deals this year.
"Businesses will need to navigate the high-cost and reduced liquidity environment for a little longer. Once there is evidence of a more stable market with higher certainty, investor confidence should return, and prominent companies that had postponed IPO plans may restart, albeit at more modest valuations," it added.
“Amid persistent macroeconomic and geopolitical uncertainty, exacerbated by stress in the global banking system, IPO windows are fleeting and funding conditions are getting tougher, with investors prioritising value over growth. IPO-bound companies need to focus on building sustainable businesses with strong fundamentals to be well-positioned in a volatile environment and meet the challenges and opportunities of going public,” said EY Global IPO leader Paul Go.