Global IPO activity ‘cautiously optimistic’ in Q1

April 13, 2024

The global IPO market began the year on a cautiously optimistic note, according to analysis by EY, with activity declining in volume in the first quarter of the year, but increasing in value.

287 initial public offerings (IPOs) to the value of $23.7 billion were launched in the first three months of 2024, the report showed, representing an 7% reduction in volume and a 7% rise in proceeds year on year.

An initial public offering is the process of offering shares of a private corporation to the public in a new stock issuance for the first time allowing the company to raise equity capital from public investors.

The Americas and EMEIA IPO markets had a bright start, increasing global proceeds.

However, the Asia-Pacific region started on a weaker note, weighing down the overall global volume of IPOs.

Encouragingly, the majority of key IPO markets witnessed a significant number of newly issued IPOs whose current share prices surpassed their offer prices – indicating an improvement in valuations and pricing levels and, potentially, reflecting growing confidence among issuers and investors.

“The global IPO market has shown welcome signs of vigour in the first quarter of 2024, with an upswing in IPO activity, deal values up compared to 2023 and many IPOs outpacing their list prices on debut,” said Fergal McAleavey, EY Ireland Corporate Finance Partner.

“Despite the restrained overall market activity in recent years, there’s an uptick in enthusiasm from both IPO issuers and investors, as market dynamics evolve and a more welcoming landscape for public listings emerges globally.”

The analysis revealed the promise and potential of Artificial Intelligence (AI) – particularly Generative AI – is leading to significant investment into this rapidly expanding area.

However, with the majority of AI and AI-associated businesses either still in the seed or early stage of funding rounds, its impact is not yet being felt in the IPO market.

EY forecasts that as many of these companies mature in the private domain there may be a surge in IPOs in future years.

Mr McAleavey said, “Positively, inflation continues to decline and interest rate cuts from Central Banks globally are more a question of ‘when, not if’. This could attract investors back to IPOs by improving liquidity and return outlooks. However, the global economy remains on a soft growth trajectory in 2024, with developed markets likely to see modest growth while emerging markets stay on a firmer growth path”.

IPO activity in Ireland remains subdued, but McMcAleavey said the hope is that improvements in global market conditions, expected interest rates cuts and a number of recent high-profile IPOs will have a positive, knock-on effect domestically for companies considering going public and help spur activity.

“It’s crucial to note however, that today’s thriving companies have a much wider range of options and greater access to private funding than in previous years. This abundance of private equity capital, often referred to as ‘dry powder,’ is so substantial that an IPO, while still a viable route for businesses, is no longer the exclusive pinnacle of success it once was.”

He said, globally, IPO candidates are being influenced by the pivot in investors’ preference over recent times toward proven profitability in an altered interest rate landscape, and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the momentum generated by the potential of AI.

“To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts.”

Article Source – Global IPO activity ‘cautiously optimistic’ in Q1 – RTE

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