KUALA LUMPUR (July 15): Worldwide initial public offering (IPO) momentum continued to slow from the first quarter of 2022 (1Q22) into 2Q22, resulting in a considerable decline in both deal numbers and proceeds, according to EY Initial Public Offering Services (EY).

In a statement on Friday (July 15), the firm said that heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter.

It said the dramatic slowdown in IPO activity in year-to-date (YTD) 2022 after a record year in 2021 was experienced across most major markets.

EY said that for 2Q22, the global IPO market saw 305 deals raising US$40.6 billion (about RM180.53 billion) in proceeds, a decrease of 54% and 65% year-on-year (y-o-y) respectively.

It said YTD 2022, there were a total of 630 IPOs raising US$95.4 billion in proceeds, reflecting decreases of 46% and 58% y-o-y respectively.

The 10 largest IPOs by proceeds raised US$40 billion, with energy dominating three of the top four deals, replacing the technology sector as the top IPO fund raiser.

The technology sector continued to lead by numbers, but the average IPO deal size came down from US$293 million to US$137 million, whereas energy has overtaken to lead by proceeds, with the average deal size increasing from US$191 million to US$680 million y-o-y.

EY said special purpose acquisition company (SPAC) IPOs were significantly down in line with traditional IPO activity despite new markets joining.

It said the SPAC market had been challenging this year as a result of broader market conditions, regulatory uncertainty and increased redemptions.

A record number of existing SPACs are actively seeking targets, with the majority of them facing potential expiration in the next year. However, market performance and regulatory clarity will likely drive future deal flows.

EY global IPO leader Paul Go said any initial momentum carried from the record IPO year of 2021 was quickly lost in the face of increasing market volatility from rising geopolitical tensions, unfavorable macroeconomic factors, weakening stock market/valuation and disappointing post-IPO performance, which further deterred IPO investor sentiment.

“With tightening market liquidity, investors have become more selective, and are refocusing on companies that demonstrate resilient business models and profitable growth, while embedding ESG (environmental, social and governance) as part of their core business values,” he said.

EY said the Asia-Pacific area finished the quarter with a 42% decline in proceeds and a 37% decline in deals y-o-y.

However, Asia-Pacific markets performed relatively better, benefiting from the two largest global IPOs YTD.

The region saw 181 IPOs raising US$23.3b in proceeds during 2Q22, and 367 IPOs raising US$66 billion in proceeds in YTD 2022.

In terms of sector activity YTD, materials led the way with 78 IPOs, closely followed by industrials with 77 IPOs.

YTD, the Shenzhen Stock Exchange had the highest number of deals with 82, constituting 13% of global IPOs.

Meanwhile, the Shanghai Stock Exchange had the highest proceeds with US$32.8 billion, making up 34% of global IPOs YTD.

EY said that YTD, ASEAN saw a total of 54 IPOs raising US$2.4 billion, down 2% in the deal number and 55% in proceeds y-o-y.

The notable decline in proceeds was due to a lack of mega IPOs (IPOs with proceeds equal to or greater than US$1 billion) in YTD 2022, compared with three mega IPOs in YTD 2021 that raised US$3.9 billion.

ASEAN exchanges that were most active were Indonesia (22 IPOs raising US$1.3 billion), Thailand (13 IPOs raising US$300 million), and the Philippines (seven IPOs raising US$300 million), followed by Malaysia (six IPOs raising US$500 million) and Singapore (six IPOs raising US$33 million).