Global IPO activity up despite heightened investor caution

The global initial public offer (IPO) market continued its recovery to end the first half of the year strongly, according to EY Global IPO Trends: 2014 Q2.

There were a total of 588 deals raising around $117.7 billion in the first six months of the year, an increase of 60 percent and 67 percent, respectively, on the same period in 2013, and the highest amount of capital raised in the first half since 2007.

In Q214, there were 333 IPOs raising $70.7 billion, a 30.6 percent increase on the previous quarter and a rise of 62.4 percent compared with Q213 by deal numbers.

As economic recovery continues in many markets, equity indices remain buoyant and volatility is trending downward, the fundamentals are in place for a sustained period of strong and steady IPO activity.

“Investor confidence has been bolstered by the relatively strong after-performance of companies that have recently gone public compared to returns in the equity markets more generally. With a solid pipeline of IPO-ready businesses across a broad range of geographic markets and from multiple sectors, there is no shortage of supply. This will increase the pressure on pricing as investors will be wary of meeting over-optimistic valuations,” said Maria Pinelli, EY’s global vice chair of Strategic Growth Markets.

Pinelli further said: “The IPO market is very strong across a number of regions and sectors, and all the indicators are that this upward trend is sustainable. Pricing is now starting to come under pressure in some markets, suggesting that investors are displaying a savvy and commendable level of caution. They are not prepared to invest in deals that are over-valued, which means that now more than ever those companies which come to market at the right time with the right growth story will only attract investor interest if they are priced right.”

IPO activity was spread broadly across sectors, with healthcare the most active in the first half of the year, with 103 IPOs, more than double the volume in the same period in 2013. Technology IPOs doubled in number (78 IPOs), while energy raised the most capital through IPOs in the first six months of 2014 ($17.6bn).

Europe has seen 162 IPOs raising $44.5 billion in 2014 so far – an increase of 131 percent in deal numbers and 351 percent in capital raised compared with the same period a year ago and the best since 2007. London was the region’s standout performer with its main and junior markets hosting a combined total of 71 IPOs raising $18.5 billion, accounting for 12 percent of global deal volume in 2014 so far. Other markets also featured strongly, with the Euronext (Paris, Amsterdam, Brussels and Lisbon) posting 19 deals which raised $$8.6 billion, while Borsa Italiana (Milan), NASDAQ OMX (Copenhagen and Stockholm) and Bolsa de Madrid – none of which normally feature among the top 10 global exchanges – hosting 11 IPOs raising $2.5 billion, 10 deals via $4.3 billion and five deals via $5.6 billion, respectively.