2014 poised to be an 'excellent' year for IPOs

Asia tagged as the most active region in 1Q14.

According to a release by Ernst & Young, a positive first quarter points to strong global IPO activity in 2014. There was a total of 239 deals raising around US$44.3b in Q1’14, continuing the market momentum built up in a strong end to 2013. 

Compared with Q1’13, deal numbers were 47% higher and capital raised was up 82% (163 deals, US$24.4b), making this the most active first quarter since 2011. January was stronger than normal, with 101 IPOs raising US$18.5b, the largest amount of capital raised in the first month for over a decade.

2014 poised to be an excellent year for IPOs

Terence Ho, EY’s Greater China IPO Leader says: “A combination of rising equity indices and lower volatility set the global IPO market off to a strong start in the first quarter. “We believe this points the way to sustained high levels of activity through the first half of 2014.” 

Financial sponsors are a key driver

Globally, private equity (PE) and venture capital (VC) were key drivers of IPOs in the first quarter, accounting for 33% of global deal numbers, with the US and EMEIA reporting 72% and 26% of sponsor-backed IPOs, respectively. Ho adds: “We expect that PE will continue to seize the opportunity presented by the wide open IPO window to clear out aging investments from their portfolios, realize gains for investors and lock in profits for reinvestment.” 

Mainland Chinese exchanges reopen

With 103 IPOs raising US$16.9b, Asia was the most active region in Q1’14. Asian exchanges accounted for 43% of global IPO activity by deal number and 38% of capital raised. “With the reopening of mainland China’s stock exchanges delivering the predicted run of new listings, and a pipeline of around 700 companies ready to go public, Asia will continue to see a high number of IPOs” says Ho. 

“Activity was led by 48 new listings in Mainland China which raised US$5.4b. While Hong Kong raised US$4.7 b with 18 IPOs, which represented a 80% increase in deal number and 343% increase in capital raised compared to Q1’13 (10 IPOs, US$1.06b raised).

Investors will continue to have an abundance of investment options in Asia, in terms of location, sector of investment and type of fund raising instrument.” Seven of the quarter’s 20 biggest IPOs were in Asia, including the largest – the US$3.1b listing of HK Electric Investments Ltd on HKEx in January, while Japanese exchanges had three listings in the top 20, Shanghai exchange saw two listings and Bursa Malaysia saw one listing.