Overall global proceeds from initial public offerings rose in the year so far - positive news for wealth managers hoping for more HNW individuals entering the frame, figures show.

Further evidence mounts that Asia is a strong region for liquidity events where new millionaires are minted. 

According to EY (aka Ernst & Young), Asia-Pacific continued to dominate global IPO activity, accounting for six of the top ten exchanges globally by deal number and five of the top ten exchanges by proceeds. On the downside, however, 2018 deal volumes (666 deals) fell 31 per cent versus 2017, while proceeds ($97.1 billion) were up by 28 per cent due to a number of mega IPOs in the region. Japan posted 97 IPOs in 2018, up by 2 per cent in terms of volume compared with 2017, but surging 333 per cent over 2017’s proceeds. This gain can be attributed to the $21.1 billion listing of telecommunications giant SoftBank Corp on the Tokyo Stock Exchange in mid-December - one of Japan's largest ever IPOs - and also the listing of Japan's first two unicorn IPOs.  

Globally, IPO proceeds rose in 2018, supported by investor confidence, large pools of liquidity, strong valuations and low interest rates, EY said.

"Through a fog of uncertainty, IPO markets around the world found a clear path forward and investment opportunities ultimately delivered returns in 2018, as investor confidence, mega IPOs and the rise of IPOs by unicorn companies helped provide assurance for IPO investors,” Dr Martin Steinbach, EY Global and EY EMEIA IPO Leader, said.

“While the fourth quarter was weak, the year ended as expected, with 2018 activity held back toward the end of the year by geopolitical tensions, trade tensions among the US, China and EU, and the looming exit of the UK from the EU," he continued. 

Initial public offerings, along with events such as private equity deals, venture capital transactions and mergers, help to breed new high net worth and ultra-HNW individuals and so are tracked by wealth managers. As shown in a recent study by UBS and PricewaterhouseCoopers, China, for example, has emerged as a hot-spot for spawning new billionaires, outpacing the growth rate of the US in this regard. 

The EY report notes that so far this year, 2018 has registered 1,359 IPOs with proceeds of $204.8 billion - a 6 per cent increase on proceed in spite of a 21 per cent fall in volume. The rise of unicorn-related IPO activity and mega IPOs were key factors in helping to push 2018 proceeds beyond 2017 levels. This trend is expected to continue into 2019, with the backlog of IPO candidates increasing and capital becoming more widely available. (“Unicorn” is a start-up firm with a market capitalization of $1.0 billion or more.)

The technology, industrials and health care sectors were the most prolific sectors by deal numbers in 2018, together accounting for 652 IPOs (48 per cent of global IPO by deal numbers) and raising $84.2 billion in total (41 per cent of global proceeds).

Activity in the fourth quarter of 2018 (326 IPOs and proceeds of $53.7b) fell by 34 per cent in deal volume and dropped 10 per cent lower by proceeds compared with a year ago. 

The report noted that market volatility and continued geopolitical uncertainty were contributing factors in a strong decline in quarter-over-quarter IPO activity in all regions during Q4 2018, signaling what is set to be a cautious start to 2019. 

Americas IPOs
With 261 IPOs raising $60.0 billion, deal volumes and proceeds of the Americas IPO markets in 2018 exceeded 2017 numbers by 14 per cent and 16 per cent, respectively. The US remained in the spotlight as the leading source of IPOs in 2018, accounting for 79 per cent of Americas IPOs and 88 per cent by proceeds. Twenty nine per cent of US exchange IPOs were cross-border, with 60 companies from 15 countries choosing to list in the US during 2018, an increase from 24 per cent in 2017.

Canada's Toronto Stock Exchange and Venture Exchange saw 17 IPOs, which raised US$1.1 billion, accounting for 7 per cent of Americas IPOs and 2 per cent by proceeds, while 26 unicorn companies (raising a total of $15.0 billion) came to the US public markets in 2018.

"Despite muted IPO activity in Central and South America exchanges in the second half of 2018, the IPO pipeline continues to build in the Americas. The US IPO markets will finish the year strong, with both volume and proceeds surpassing 2017 levels. A number of unicorn companies brought IPOs to market in 2018, with more on record stating that they will be conducting IPOs in 2019. As we head into the New Year, we expect IPO volumes to remain steady, driven by a number of high quality issuers that have kicked off IPO processes,” Jackie Kelley, EY Americas IPO Markets Leader, said.