These important drivers of new HNW wealth have lost their momentum in recent months, as economic and political jitters have taken a toll.
Companies are biding their time before floating on the world’s equity markets because of economic and political uncertainties, such as US-Chinese trade confrontations and Brexit, data shows. European share floats have suffered particularly heavily.
Initial public offerings – important liquidity events that wealth managers track – have been backed up, EY, aka Ernst & Young, said in a new trends report. Overall, 256 IPOs came to the market in the third quarter of 2019 with total proceeds of $40.2 billion falling 24 per cent by volume and 22 per cent by proceeds compared with the same quarter in 2018.
In the first nine months of 2019, IPO numbers shrank 26 per cent by deal volume (768) and dropped by 25 per cent drop in funds raised ($114.1b) versus the same period a year ago. While deal numbers were down, average first-day returns on the main markets were 27 per cent and average current post-IPO performance was 32 per cent.
Technology, healthcare and industrials saw the largest share of IPOs for the year to date, together accounting for 407 IPOs and raising a combined $69.4 billion.
Technology has continued to be the strongest sector by deal numbers and proceeds since January this year, making up 23 per cent of global deal volume (179 IPOs) and 36 per cent of proceeds ($41.5b).
"A quiet Q3, combined with persistent geopolitical uncertainties, has led to tepid third-quarter results across global IPO markets,” Paul Go, EY Global IPO leader, said.
“Although Q3 2019 IPO activity is down both in deal numbers and proceeds compared with this time last year, Shanghai's STAR Market was launched in July 2019 to much fanfare, raising investor sentiment in that region. Elsewhere around the world, the backlog of some larger IPO issuers waiting for the winds to change continues to grow. As we enter into the traditional peak IPO season, we expect global IPO activity to pick up in the last quarter and into 2020 when there is more clarity to US-China trade tensions and developments around Brexit,” Go said.
On a quarterly basis, the Americas saw 47 IPOs that raised $11.9b in Q3 2019, a drop of 30 per cent by deal volume and 10 per cent by proceeds from Q3 2018.
However, US exchanges accounted for the majority of IPOs in the Americas region, 79 per cent by number of deals and 95 per cent by proceeds year-to-date in 2019. This was driven by several high-profile technology unicorns that have gone public so far this year. The NASDAQ and NYSE ranked first and second respectively by proceeds globally in YTD 2019.
In Asia-Pacific, volume so far this year fell by 9 per cent (436 IPOs) and proceeds decreased by 27 per cent ($46.1 billion) compared with the same period in 2018. The launch of Shanghai's STAR Market offset more muted activities in Hong Kong, Japan and Australia in Q3 2019.
Asia-Pacific continued to dominate global IPO activity in Q3 2019, representing seven of the top 10 exchanges by volumes and five of the top 10 exchanges by proceeds.
Europe, Middle East, India and Africa
In EMEIA, deal volumes and proceeds in the year so far slumped by 52 per cent on a year ago, with just 172 share floats, raising $21.1b (down by 41 per cent). Ongoing US-EU-China trade tensions have dampened both market sentiment and the economic outlook in EMEIA. At the same time, with no deal in sight, Europe and the UK are bracing for the risk of a “hard Brexit” in Q4 2019.
"EMEIA is caught in the eye of a perfect storm. In Q3 2019, the region continued to face headwinds in the form of ongoing US-China-EU trade issues and Brexit uncertainty,” Dr Martin Steinbach, EY EMEIA IPO leader, said.
“IPO activity is expected to pick up after a quiet Q3 as we are heading into the most active IPO season of the year. The region is riding the tailwind from a longer-than-expected low interest rate environment, especially in Europe which is pushing investors to look for high-return assets,” he added.