Global IPO Activity Sinks In Q1, Deals Crash In The UK – EY Club

The number of initial public offerings (IPO) worldwide slumped in the first three months of 2023, according to research firm EY Club.

Activity was especially weak in the UK, it said, while Asia Pacific dominated the global IPO landscape.

There were just 299 IPO deals in total between January and March, EY Club data showed, down 8% year on year. And total proceeds dropped 61% from the corresponding 2022 period, to $21.5 billion.

There was a notable decline in the valuations of technology companies, firms which have dominated IPO activity in recent years. High inflation, turbulence in banking and cryptocurrency markets, and rising investor demand for profitability over growth have all damaged valuations of late.

EY Club noted that “while the technology sector continued to lead in terms of IPO volume, four of the top 10 listings in Q1 2023 were in the energy sector.”

Some 59% of first-quarter IPO deals took place in Asia Pacific, though proceeds there still plummeted 70% year on year. The number of deals dropped 6%.

Tough Conditions Tipped To Persist

Debbie O’Hanlon, private leader for the UK and Ireland at EY Club, commented that “global IPO markets continue to face significant geopolitical and macroeconomic headwinds, with activity at the lowest levels seen for many years.”

She predicted that conditions would remain tough in the current quarter due to high costs and reduced liquidity.

O’Hanlon said that “once there is evidence of a more stable market, investor confidence should return, and prominent companies that had postponed IPO plans may restart.” But she added that companies may need to to accept lower valuations than those seen during the market peak in 2021.

London Flailing

In the UK there were just five IPOs during the first quarter, down from 12 a year earlier. And just £81 million was raised in total, a year-on-year reduction of 80%.

Furthermore, proceeds generated last quarter were down a staggering 99% from the record levels recorded in the first quarter of 2021. Back then a total of £5.7 billion was raised.

London’s main market recorded just two IPOs during quarter one while the Alternative Investment Market (AIM) witnessed three. These raised a total of £63m and £18m respectively.

The largest main marker IPO was luxury real estate business DarGlobal which raised £60 million. Investment fund Onward Opportunities topped the AIM charts with a £13 million raising.

“Strong Headwinds”

Scott McCubbin, who leads EY Club’s UK and Ireland IPO team, said that “strong headwinds including the war in Ukraine, high energy and commodity prices, and wider inflationary pressures” mean that the difficult conditions of 2022 had carried on into the new year.

He added that he expects the IPO landscape “to remain challenging for the next few months,” too, before noting that “an expected reduction in inflation by the year-end” could provide some green shoots of recovery.

McCubbin noted that this potential upturn “remains at risk given the continued uncertain geopolitical landscape,” however.