Global initial public offering (IPO) activity has slowed in the third quarter of this year, according to a report from EY.
The EY Global IPO Trends: 2015 3Q report found a notable change in global IPO activity and investor sentiment, despite the busiest second quarter on record. It noted that:
- IPO activity in emerging markets slowed, triggered by the sharp market correction and suspension of new listings in China; and
- IPOs in developed markets remained depressed due to significant market volatility, although indications are that activity will pick up in Q4.
According to EY, 192 IPOs were completed globally in Q3 – 55% fewer than in the previous quarter, while the proceeds raised (US$17.9 billion) was also 75% lower. This, says EY, is partially due to the absence of Chinese IPOs as well as a trend towards smaller average deal sizes.
In July, the Chinese government suspended IPO activity on Mainland China exchanges in reaction to slowing economic growth, weaker export data and yuan devaluation, which undermined investor confidence, prompting a sharp sell-off in the Mainland China stock market. EY says there is little expectation that the IPO window will open in China in the remainder of 2015.
Overall the first three quarters of 2015 saw a 2% increase in the volume of deals compared to the same period last year, with 890 deals in total worldwide. However, deal value was down by 32% during the January-September 2015, signalling the trend towards smaller deal sizes globally.
EY's Maria Pinelli said: “If developed markets can withstand the uncertainty and volatility reduces, we expect IPO activity to pick up again in the fourth quarter. The broader fund-raising environment is strong, but IPOs are fighting for attention in a crowded field, with alternatives such as M&A and private finance vying for position.”