The impact of the COVID-19 pandemic continued to play a significant role in declining IPO activity in the first half of 2020 – as shown in the quarterly report EY - Global IPO trends: Q2 2020. Overall, Q2 2020 saw a decline in IPO activity from Q2 2019 across all regions by deal numbers and for the Americas and EMEIA by proceeds.
Global IPO activity slowed dramatically in April and May, with a 48% decrease by volume (97 deals) and a 67% decrease in proceeds (US$13.2b) compared to April and May 2019. This dragged down 1H 2020 regional activities compared with 1H 2019 and overall YTD deal volume (419 deals) and proceeds (US$69.5b) decreased 19% and 8%, respectively, from YTD 2019.
Despite a late flurry of deals in June, global IPO activity was sluggish on Americas and EMEIA stock exchanges YTD, while Asia-Pacific IPO activity increased. Americas deal volume (81 deals) and proceeds (US$24.5b) both fell by 30% compared with YTD 2019, while EMEIA IPO deal volume (68 deals) and proceeds (US$10.1b) fell 50% and 44%, respectively. Asia-Pacific IPO activity rose 2% by deal numbers (270 deals) and rose 56% by proceeds (US$34.9b) compared with YTD 2019.
"In Romania, the capital market has developed significantly in recent times towards bond issues, compared to the IPO area, where the pace is still slow. The first half of 2020 was strongly affected by the spread of the COVID-19 virus, especially from the perspective of the IPOs. Although long awaited, listings of state-owned companies have been postponed again as a result of the parliamentary vote to temporarily freeze the sale of any part of state-owned companies.
At the moment, an increase in the supply of shares on the Romanian capital market is needed in order to maintain the eligibility criteria for emerging market status. Potential listings in the retail and IT sector are currently being announced and we may see greater interest in the AeRO market from companies. However, although the efforts of the Bucharest Stock Exchange and the Financial Supervisory Authority have been considerable in promoting the benefits of listing on the stock exchange, the preference of Romanian entrepreneurs remains for financing through credit institutions", said Florin Vasilică, Strategy and Transaction Leader, EY Romania.
The technology, industry and health sectors dominated IPO activity in the first half of 2020
The technology, industrials and health care sectors dominated in YTD 2020. Technology saw 87 IPOs raise US$17.2b, industrials saw 83 IPOs raise US$9.6b and health care had 76 IPOs that raised US$15.9b.
Americas deal landscape slows
US exchanges still accounted for the majority of IPOs in the Americas in the first half of 2020, with 79% by deal volume (64 deals) and 91% by proceeds (US$22.3b); this included five unicorn IPOs. The health care and technology sectors continued to have the highest level of IPO activity in the US in YTD 2020, representing 55% and 25% by deal volume, respectively. The health care sector dominated in proceeds (US$10.2b), contributing 46%, from 35 IPOs.
The Mexican stock exchange posted one IPO valued at US$1.1b, making it the eighth-largest IPO globally in Q2 2020.
Asia-Pacific IPO activity remains stable
Although year-on-year YTD 2020 IPO activity in Asia-Pacific rose by deal number (2%) and proceeds (56%), Q2 2020 saw a decline of 18% compared with Q2 2019 by deal number, while proceeds rose by 28%. Asia-Pacific exchanges accounted for four of the top five exchanges by deal volume and three of the top exchanges by proceeds. Globally, by proceeds, NASDAQ led YTD 2020, followed by the Shanghai Stock Exchange and Hong Kong Stock Exchange. By deal volume, Shanghai, Hong Kong and NASDAQ markets led the way.
In Greater China, IPO activity was up 29% by volume (179 deals) and 72% by proceeds (US$30.9b) YTD 2020 compared with YTD 2019.
In Japan, IPO volume (34 deals) declined 17% YTD 2020, while proceeds (US$625m) dropped by 53%. Australia and New Zealand IPO activity was also down YTD — 41% by volume and 82% by proceeds.
EMEIA also sees IPO deal slowdown
After a strong start to 2020, YTD IPOs (42) and proceeds (US$7.8b) declined 47% by volume and 48% by proceeds in Europe, as the COVID-19 pandemic significantly curtailed IPO activity from March through to May. In the Middle East and North Africa (MENA), IPO activity was down 11% by volume (8 IPOs) and down 43% by proceeds (US$0.9b) YTD 2020. Indian exchanges saw 16 IPOs, which raised US$1.4b YTD 2020, a decline of 61% by deal number and 9% decrease by proceeds. There was also one IPO each on the Malawi and Bangladesh exchanges, which raised US$29m and US$7m, respectively.
H2 2020 outlook: IPO rebound expected
Given the COVID-19 outbreak and its negative impact on global economic activities, in the short to medium term, governments around the world will continue to implement policies and stimulate economies against rising unemployment. At the same time, central banks will inject more liquidity into the financial systems. Both actions bode well for equity markets and IPO activity in 2H 2020.