This article is an extract from Lexology Panoramic: Initial Public Offerings 2025. Click here for the full guide.
After subdued levels of activity in 2022, the global initial public offering (IPO) market slowed even further in 2023, despite relatively strong stock market performance and low market volatility, according to a study by EY, amid a rising interest rate environment and geopolitical tensions. The global 2023 IPO market saw year-over-year decreases in both the number of IPOs and the aggregate amount of IPO proceeds raised, with a decrease of 8 per cent to 1,298 IPOs and a decrease of 33 per cent to US$123.2 billion proceeds. The figures in this overview exclude the special purpose acquisition companies (SPACs) that went public in 2023. (The option for private operating companies to go public through business combinations with SPACs is an alternative to traditional IPOs that has existed for decades but experienced a surge in 2020 and 2021. Since then, however, the SPAC IPO market has been severely negatively impacted by an increase in investor redemptions, heightened regulatory scrutiny and tightened market liquidity coupled with poor stock price performance.)
Notwithstanding anaemic IPO activity levels during 2023, some observers had hoped that 2024 would bring moderating inflation and an end to the tightening of monetary policies leading to increased IPO activity. However, as of the first quarter of 2024, overall activity levels in the global IPO market remain muted. In contrast with the comparable period in 2023, the number of IPOs decreased 7 per cent to 287 IPOs in the first quarter of 2024, although aggregate proceeds actually increased 7 per cent to US$23.7 billion as a result of increased IPO activity levels in certain regions including the United States, India and Japan.
In the United States, IPO activity levels in 2023 rebounded from the 32-year low reached in 2022. The number of IPOs increased 47 per cent year-over-year to 132 IPOs, resulting in US$22.2 billion in aggregate proceeds, a year-over-year increase of 157 per cent, according to EY. The US IPO market continued to attract non-US companies, with 70 cross-border IPOs in the United States in 2023. Such cross-border IPOs represented 53 per cent of all US IPOs in 2023, up from 39 per cent in 2022. In addition, in 2023, smaller IPOs continued to account for most US IPO activity, with nearly 70 per cent of IPOs on US exchanges raising less than US$25 million in 2023, versus an average of just 10 per cent in the prior decade. Buoying the global IPO markets, the US IPO market in the first quarter of 2024 was quite active, with the number of deals increasing 48 per cent to 49 IPOs and aggregate proceeds increasing by a remarkable 230 per cent to US$8.4 billion, in each case, compared with the same period in 2023.
The 2023 year was a challenging one for the IPO market in the Asia-Pacific region with headwinds from China’s slow recovery from the pandemic and geopolitical tensions, according to EY. The 2023 IPO market in the Asia-Pacific region decreased 18 per cent year-over-year with 732 IPOs, raising aggregate proceeds of US$69.4 billion or a decrease of 44 per cent year-over-year. Mainland China had a slow year, with 372 IPOs raising US$56.2 billion in aggregate proceeds in 2023, a decrease of 26 per cent in number of IPOs and decrease of 44 per cent in proceeds versus 2022. Some observers viewed Japan as a hotspot of IPO activity in 2023, according to EY, with 92 IPOs in 2023, a 2 per cent increase year-over-year, raising US$4.2 billion in aggregate proceeds, an increase of 75 per cent year-over-year, and expect Japan’s IPO activity to further increase in 2024 amid favourable reforms by the Tokyo Stock Exchange. Australia saw lower levels of IPO activity in 2023, with 34 IPOs raising US$700 million in aggregate proceeds, representing a year-over-year decrease of 60 per cent and 11 per cent, respectively. As in 2022, New Zealand had no IPOs again in 2023.
Europe, the Middle East, India and Africa (EMEIA) accounted for 32 per cent of global IPOs by number in 2023, according to EY. The EMEIA saw a 7 per cent year-over-year increase in IPOs with 413 IPOs in 2023, raising US$31.1 billion in aggregate proceeds or a 39 per cent year-over-year decrease. In Europe, year-over-year IPO activity decreased 20 per cent by deal numbers and 32 per cent by proceeds, with 136 IPOs raising US$13 billion in aggregate proceeds in 2023. In the United Kingdom and Ireland, year-over-year IPO activity decreased 36 per cent by deal numbers and 52 per cent by proceeds. In Germany, Switzerland and Austria, year-over-year IPO activity decreased 23 per cent by deal numbers and 64 per cent by proceeds. The Middle East and North Africa (MENA) had similarly low levels of IPO activity in 2023, with year-over-year deal numbers and proceeds decreasing by 12 per cent to 57 IPOs and by 53 per cent to US$11.2 billion, respectively. Saudi Arabia and the United Arab Emirates accounted for most of MENA’s IPOs, by number and proceeds, with 47 IPOs raising US$9.6 billion in 2023. By contrast, India had a relatively strong 2023 by deal numbers, with year-over-year activity increasing by 48 per cent to 220 IPOs, although aggregate proceeds decreased by 13 per cent year-over-year to US$6.9 billion.
IPO activity in Latin America nearly came to a halt in 2023. There were no IPOs in Brazil in 2023 and only one IPO in Mexico during the same period, the latter raising proceeds of US$400 million.
The editors are pleased to be associated with some of the finest legal counsel in each of the countries covered in this volume and hope that you find the chapters relevant and useful.
