Strong Q4 IPO activity demonstrates resilience, defies expectations
Despite the uncertainty of 2020, IPO investors enjoyed a prosperous year as IPO activity proved resilient to the impact of the COVID-19 pandemic supported by low interest rates and expansionary monetary policies. Global IPO volumes continued to accelerate, increasing by 19% to 1,363, while proceeds increased 29% year-on-year to a total of US$268b. This strong IPO performance indicates global equity markets continue to provide the platform for companies with access to public capital.
The Americas region saw the biggest year-on-year increase in both IPO volumes and proceeds, with 2020 IPO numbers increasing 30% to 282, and proceeds rising 78% to US$97.9b. Asia-Pacific also made significant gains recording a 20% increase in IPO volumes to 822 IPOs and 45% in proceeds to US$136.2b. In EMEIA, while IPO numbers rose 7% to 259 IPOs, proceeds fell 43% to US$33.9b. Overall, 2020 saw a steady increase in cross-border IPO volume, accounting for 7.9% of global IPOs and 10% by proceeds, compared with 8% and 7.1% in 2019 respectively.
The technology sector maintained its lead by both volume and proceeds finishing the year with 324 IPOs and US$89.1b respectively. By IPO number, industrials followed in second place with 243 IPOs and US$31.4b, and then health care with 235 IPOs and US $50.4b in proceeds. These and other findings were published today in the EY quarterly report, EY Global IPO Trends: Q4 2020.
Florin Vasilică, Strategy and Transactions Leader, EY Romania: “In the context of the uncertainties generated by the current health crisis, the Romanian market demonstrated a certain degree of stability and resilience. In Q4’20, the local stock exchange hosted on AeRO platform two IPOs of EUR 1.1m from two important sectors such as agriculture and IT&C. Moreover, the local market has become a reliable liquidity provider for the issuers of bonds, with the Ministry of Public Finance attracting in the last quarter of 2020 over EUR 550m from retail investors. Other bond issuances cumulated approx. EUR 12.3m in Q4’20 from strategic sectors such as banking, consumer and real-estate.
In 2021, the volatility on the equity market could persist depending on the evolution of the COVID-19 pandemic, success of vaccine campaigns and overall global market performance. Nevertheless, the Romanian capital market has the opportunity to consolidate and become an important financing channel for both private and State-owned companies, especially now that the Romanian Government is considering repealing Law no. 173/2020 which regulated the interdiction of public listings for two years. In this current context, listing of small stakes in state-owned companies could alleviate the state budget, leaving room for the financing of strategic public investments.
With central banks continuing to support the markets through liquidity injections, there is an excess of money that can allow projects to be successfully financed. Thus, local entrepreneurs can benefit in 2021 from this multitude of financing sources to secure medium and long term development.”
The Americas IPO market adapted for resilience in 2020
Americas IPO momentum remained positive in Q4 2020, finishing the year with 282 IPOs raising US$97.9b, a respective increase of 30% and 78% year-on-year. The health care sector remained strong with 40% of total deals taking place in the region, seeing 114 IPOs raise US$27.9b during 2020. The technology sector followed with 77 IPOs raising US$40.4b and industrials, which saw 19 IPOs raise US$8.0b in 2020.
US exchanges continued to flourish, accounting for 79% (224) of the region’s IPOs in 2020 and 88% (US$86.2b) by proceeds. 2020 was also the most active year for Brazil by deal numbers (28) and proceeds (US$8.5b) since 2007 as low interest rates led investors to the market. While the US exchanges remained agile, special purpose acquisition companies (SPACs) continue to emerge as a more mainstream path to the public markets for companies due to their speed and deal certainty.
Asia-Pacific markets remain strong in face of COVID-19 pandemic
Despite a challenging year, 2020 activity in the Asia-Pacific region surpassed 2019, increasing 20% (822) by volume and 45% (US$136.2b) by proceeds in 2020. In fact, the region saw the highest proceeds since 2010. Industrials led the sectors with 181 IPOs raising US$20.8b in proceeds, followed by technology with 180 IPOs and US$38.7b in proceeds, and materials, which saw 95 IPOs raising US$7.4b.
Greater China accounted for three of the top five exchanges globally. With investor sentiment remaining positive in Q4 2020, Greater China saw an acceleration in both IPO volumes and proceeds, garnering US$119.1b via 536 IPOs in total.
Japan’s startup ecosystem continued to drive growth as well in Q4 2020, seeing a modest 4% (93) increase in IPOs and 13% (US$3.3b) decline in proceeds through 2020.
EMEIA’s IPO candidates took advantage of the open window of opportunity
EMEIA gained momentum in Q4 2020 despite the second wave of the COVID-19 pandemic sweeping through the region. Through 2020, EMEIA saw 259 IPOs raise US$33.9b in proceeds, a 7% rise and 43% decline respectively.
In Europe, the market continued to pick up speed with 2020 total deal numbers increasing 23% and proceeds rising 9% year-on-year. The UK IPO market maintained its Q3 momentum with two mega IPOs in Q4, resulting in a 30% increase by deal numbers and 56% increase by proceeds year-on-year.
Q1 2021 outlook: markets should sustain momentum
As COVID-19 vaccine availability keeps spirits high and companies take advantage of ample liquidity, global IPO markets should remain healthy and will likely sustain momentum going into H1 2021. From a geopolitical perspective, the agreed Brexit deal favors positive IPO market sentiments as agreements between the EU and the UK continue to take shape. While the window of opportunity remains open, IPO candidates should remain vigilant for proposed regulatory changes, a potential market correction stemming from increases in pricing volatility and the pace at which the world recovers from the COVID-19 pandemic.