Investor confidence was challenged throughout 2016 by heightened political and economic uncertainty globally.
As a result, the number of Initial Public Offerings (IPOs) in 2016 fell 16% year-over-year (YoY) to 1,055 and capital raised was down by 33% to $132.5billion.
The volume of megadeals (IPOs with proceeds over $1billion) also fell from 35 in 2015 to 21. These and other findings were released today in the EY quarterly report, Global IPO Trends: 2016 Q4.
Despite many unexpected outcomes in 2016, the reaction to geopolitical events in the financial markets has been far more positive than many had predicted. Many equity markets have risen to new highs, volatility has fallen and trailing price/earning ratios are on a rising trajectory.
Steinbach concludes: “2017 will see an uplift in global IPO volume and capital raised compared to 2016. At this point, however, it seems unlikely that the market next year will match the record levels of 2014 as some caution and uncertainty will remain across some markets. Overall, Asia-Pacific in 2017 will continue to be the engine room of global IPO activity, with stock exchanges in Greater China leading the way. The China Securities Regulatory Commission (CSRC) began speeding up IPO approvals in November, and we expect this to continue through the first half of 2017, supported by stable markets and a strong pipeline of IPO-ready companies.”
Martin Steinbach, EY Global and EMEIA IPO Leader, said: “2016 was characterized by a number of unexpected geopolitical shocks. Although market sentiment held up this year against multiple setbacks, markets will likely remain under pressure in 2017 with lingering uncertainty surrounding the future make-up of the European Union, the new US presidential administration and concerns about slowdown in China’s growth rate.
“Despite these risks, the prospects for IPO activity in 2017 look much better, especially in the US where a sharp rebound in new listings can be expected. Financial sponsor-backed IPO activity fell in 2016 compared with 2015, so the combination of rising markets, reduced volatility and strong investor appetite to generate returns is likely to see more exits via this route in the coming year.”
Despite increased activity in fourth-quarter (Q4’16), overall IPO activity for 2016 in EMEIA was down 25% YoY by deal volume to 285, while capital raised in 2016 fell 44% to $37.7billion compared with 2015.
And while European exchanges fell 36% by deal volume and 49% by capital raised over the year, India and Africa performed very strongly. India’s exchanges made impressive gains, recording a 79% uptick in proceeds on a 38% increase in deal numbers (83 IPOs raising $2.8billion).
African exchanges were not far behind, recording a leap in capital raised by 81%, albeit on the back of reduced deal volume (9 IPOs raising $800million).
Steinbach commented: “2016 has been a stop-and-go year for IPOs in European markets. Globally, we are in a period of transition that has made risks harder to predict creating challenges for growth prospects. And while the pipeline is rebuilding, companies in 2017 will look to preserve transaction flexibility by retaining a multi-track funding strategy and keeping all paths open to funding innovation and growth.”
