Uncertainty weighs on new stock market listings

Mark Johnson's picture

While UK startups may be enjoying a boom time in fundraising activities, the number of companies seeking stock market listings in the first quarter of this year has fallen, amid global macroeconomic uncertainty.

Despite the positive performance of main stock indices and a decrease of volatility in many markets, ongoing geopolitical uncertainties and trade issues continue to dampen investor enthusiasm, said consultancy firm EY in its latest global quarterly Initial Public Offering report.

This, it said, has resulted in the number of IPOs in the first three months of 2019 falling 41 per cent to 199 globally, generating $13.1 billion in proceeds, 74% lower than the same period last year.

However, EY noted that the technology, health care and industrials sectors were the most prolific producers of IPOs globally in YTD 2019, together accounting for 101 IPOs (51% of global IPO by deal numbers) and raising US$5.4b altogether (42% of global proceeds). 

By proceeds, technology was the strongest sector with US$2.1b raised (16% of global proceeds). These and other findings were published today in the EY quarterly report, Global IPO trends: Q1 2019.

"While Q1 is usually a quiet IPO quarter across regions, in 2019 we've seen IPO markets sent into a cautious wait-and-see mode as a number of factors collide”, said Dr. Martin Steinbach, EY Global and EY EMEIA IPO Leader.

“The dense fog of ongoing geopolitical tensions, trade issues among the US, China and Europe, as well as uncertainty as to how the UK will leave the European Union, slowed down IPO activity in all regions. 

“As we look to Q2 2019, we only need a successful mega IPO or unicorn from the robust IPO pipeline for the fog of uncertainty to clear and global IPO markets to spring into bloom toward the second half of 2019."

Brexit uncertainty weighs on European IPO activity

EY said that in EMEIA, deal volumes and proceeds were down substantially from Q1 2018 with EMEIA exchanges posting only 42 IPOs raising a total of $1.4bn in Q1 2019. 

However, although Q1 2019 was a remarkably slow quarter, those EMEIA IPOs that did come to the main markets experienced average first-day returns of four per cent and current returns of around 46 per cent, giving IPO investor sentiment a boost.

In Europe and the UK, the ongoing uncertainty around Brexit continued to plague IPO markets the consultancy firm said, and risk of slow growth in large European economies resulted in only 23 companies issuing IPOs, with proceeds of US$0.4bn.

"Ongoing geopolitical tensions and trade issues, the risk of slower economic growth and uncertainties about Brexit delayed IPO activity in EMEIA in Q1 2019”, Steinbach said. 

“IPO candidates are becoming more nervous, proceeding cautiously and taking a wait and see approach. However, with a number of mega IPOs and unicorns in the pipeline, and a diverse group of candidates, including family businesses, carve-outs and high-growth companies, we anticipate IPO activity to spring into action in the second half of 2019."

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