Market volatility, policy concerns to shape IPO market in 2016

Economic fundamentals, volatility and monetary policy will all continue to have an impact on the Initial Public Offering (IPO) market in 2016 said Maria Pinelli, EY’s Global Vice Chair, Strategic Growth Markets.

With stock markets riding low investors remain keen to back equities as a source of potentially higher risk and return.

“With a stop-start year behind us, we expect something similar for 2016, although we are cautiously optimistic the outlook could improve. The economic fundamentals are strong in most developed economies and any impending changes to monetary policy have been well signaled,” Pinelli said.

According to Pinelli, “Volatility, electoral uncertainty and the impact of geopolitical shocks will all impact the market in 2016, though we note with interest that IPOs seem to have been more resilient to volatility spikes in 2015 than you would expect, so it will be interesting to see if this continues in 2016,”

After 2014 record-breaking level of activity, the volume of global IPOs in 2015 fell by 2% to 1,218 IPO listings and total capital raised declined by 25% to $195.5billion.

However, despite falling short of 2014’s blockbuster year, these figures compare favourably to the 10-year annual global median of 1,241 deals raising $176.1billion, according to the fourth quarterly EY Global IPO Trends.

They also reflect divergent performance across regions in a higher volatility environment and the greater range of financing options now available.

Despite the closure of exchanges in Mainland China to new listings for part of last year, Asia-Pacific dominated 2015 IPO activity by number of IPOs and capital raised. It was also the only global region that improved on its 2014 performance.

“IPOs generally take at least two years to plan, but access to private capital is much quicker, enabling companies that need to scale rapidly the chance to lock-in the funding they need to generate competitive advantage sooner. With private investors prepared to invest greater amounts and at a later stage, we are seeing a structural shift in the market with multitrack fundraising strategies here to stay”, Pinelli added.