How can you adapt your IPO strategy in a dynamic market?

Americas and EMEIA gain ground while Asia-Pacific activity continues to slow 

During H1 2024, there was a strong appetite for equity offerings in both the Americas and EMEIA regions, buoyed by favourable stock market performance, improving IPO valuation levels and growing investor enthusiasm for new offerings. In the Americas, there were 86 IPOs with proceeds of US$17.8b, an increase of 12% and 67%, respectively, YOY.

The EMEIA region has made a remarkable comeback in H1 2024, achieving its highest global market share by number since the 2008 Global Financial Crisis, accounting for an impressive 45% of total deal volume and 46% of value. This impressive performance was spurred by major European listings indicating that more larger companies perceive the current market condition as an optimal IPO window. India also experienced a significant surge, accounting for 27% (152) of global IPOs by deal volume, up from 13% (81) in the same period last year.

The Asia-Pacific region, once a hotbed for IPOs, has seen its market sentiment dampened by a confluence of headwinds, including geopolitical tensions, elections, economic slowdown, heightened interest rates and a drought in market liquidity, which led to investor caution. The region witnessed a prolonged slowdown in H1 2024, with a mere 216 IPOs listed and US$10.4b raised. This lackluster performance represents a staggering decline of 43% and 73% by volume and value YOY, respectively.

The global IPO market reflects the broader economic backdrop, while seeking new balance amid the geopolitical and election complexities. As the pendulum of opportunity swings toward the developed Western economies, the Asia-Pacific region faces headwinds that test its tenacity. Companies contemplating IPOs need to show heightened adaptability and resilience to make well-informed strategic decisions amid the evolving IPO landscape.

IPO returns eclipse index benchmarks amid investor enthusiasm for robust market debuts

In the past two years, the IPO market has experienced a notable shift in investor focus on financial sustainability and profitability of newly listed companies, reflecting a more discerning approach in an environment characterized by tight monetary conditions and market uncertainties. 

In response to this evolving investor approach, companies considering the public option are increasingly emphasizing their revenue and profitability metrics and plans for achieving sustainable growth. The net profit margin metrics of the 2023 and YTD 2024 IPO cohorts reveal noticeable improvement across most regions. In China, regulators have introduced more stringent listing requirements for IPOs in a bid to enhance the quality of companies going public and protect investor interests.

Meanwhile, the US has showcased a broader array of companies making their market debuts, ranging from nascent technology and health ventures to mature, scalable firms. This diversity has been a key factor in driving a considerable increase in the average deal value and a notable surge in the median net profit margin across the US market. 

Unicorn IPO hope stirs as markets pivot from post-pandemic crunch to rate cut optimism

Unicorns, which are typically disruptive, privately held companies that are generally less than a decade old and have reached billion-dollar valuations, revolutionize markets or entire industries.

Within IPO pipelines, technology unicorns represent approximately half of the total IPO candidates, followed by financial, industrial and consumer sectors. AI unicorns have been particularly notable for significant funding rounds, as startups specializing in AI and machine learning (ML) gear up for public offerings amid rising investor interest in the field. The AI vertical's robust growth and substantial funding highlight its vital position in the current unicorn landscape, with some of them well-positioned for ongoing success and prospective IPOs in the near future.

Geographically, almost half of unicorns in the global IPO pipeline are from the US, reflecting its dominant position in the startup universe. Mainland China follows with 15%, a sign of its growing influence and the rapid development of its tech sector. India also shows a notable presence, with 7% of unicorn IPO candidates. The high concentration of unicorns in these regions indicates robust ecosystems that support innovation, funding opportunities and favorable regulatory environments, making them prime locations for startups aiming to go public.

Global elections amplify uncertainty over the impact of specific policies on IPOs

Just as investors and IPO candidates adapt to shifting interest rate policies, they must also cope with a complex geopolitical and election environment. This year, the political calendar is marked by elections in more than 50% of the global population accounting for nearly 60% of worldwide GDP, including many geopolitically significant regions. This amount of potential change is likely to create an exceptional level of uncertainty. 

Historically, US presidential elections have had little impact on the country’s IPO activity during an election year, apart from dampening activity during the November voting months. However, in the years following elections, IPO activity has often seen a noticeable uptick, suggesting that policy changes, economic initiatives and a stabilized market sentiment can broadly contribute to a more favorable environment for IPO.

To get more insight into the steps companies need to take to maximize their chances of IPO success, download our Guide to going public (pdf).

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