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Alternative funding could signal shift in IPO activity

The number of global initial public offerings (IPOs) in 2015 fell by 2% to 1,218 IPO listings, while total capital raised declined by 25% to $195.5 billion, according to EY's report, Global IPO Trends: 2015 4Q.

2014 was an exceptional year for IPOs, so the decrease seen in 2015 should not necessarily be interpreted as a negative sign. 2015's figures remain in line with the 10-year annual global median of 1,241 deals raising $176.1 billion.

IPOs in Asia-Pacific dominated, despite the closure of exchanges in Mainland China to new listings for part of the year.

Greater range of financing options

According to EY, the figures reflect “divergent performance across regions in a higher volatility environment and the greater range of financing options now available”.

The report found that the proliferation of alternative private and corporate capital during 2015 increased the number of funding choices for companies looking to expand. In particular, it found that private equity “dry powder” (liquid assets set aside for investment purposes) is up 3% on 2014, at $482.8 billion – almost two and a half times the capital raised by IPOs.

Access to private capital is much quicker

Maria Pinelli, EY’s global vice chair for strategic growth markets, said: “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 adds that this could signal a shift towards a “new kind of IPO” in which companies would list publicly when they are at an advanced stage of development, possibly when they are driven by strategic motivation, rather than purely by funding needs. IPO may become a means of achieving a higher brand profile and access to new markets via cross-border listing opportunities, according to EY's Pinelli.

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