As corporations wait out the consequences of turbulent stock markets, increased interest rates and inflation, and uncertainty surrounding the financial crisis, the slowdown in worldwide initial public offerings persisted in the first quarter of 2023 and is anticipated to continue in the months ahead.
According to a study released by EY on Thursday, 299 firms went public during the last three months, which is 8% less than the same period last year. The amount of money collected from these listings decreased by 61% annually to $21.5 billion.
According to Reports, the number of IPOs dropped by 45 percent in the previous year.
“In just one quarter of 2023, the global IPO market remained stagnant,” the company stated in a statement released on Thursday.
“Any early exuberance at the beginning of the year was swiftly muted by the unanticipated inflation and interest rate forecast, and the mood was further dampened by the most recent instability in the global financial sector.”
For months, investors have struggled with rising interest rates and living expenses. Recent turmoil in the banking industry, which has resulted in emergency interventions for Credit Suisse, Silicon Valley Bank, Signature Bank, and First Republic Bank, has also spooked them.
In the end, this indicates that “businesses are waiting for the stock markets to calm and recover before listing,” according to EY’s study.
Ringo Choi, EY’s Asia Pacific IPO head — a region that witnessed a decline in listings this quarter — stated that there was a “backlog” of enterprises interested in going public.
According to Choi’s analysis of public filings, there are around 800 enterprises in the planning stages on the Chinese mainland.
Yet, many corporations throughout the world are hesitating to enter the industry, especially given the disappointing performance of those that have entered in recent months.
“The majority of them claim losses,” Choi stated. “People begin to fret [and ask], ‘Well, what’s the point of having an IPO? Why do they not wait? ”
Choi stated that he anticipates the downturn to continue until at least the summer. According to Reports, investors may regain confidence later this year as “peaking inflation, lowering energy costs, and the revival of mainland China’s economy” restore investor optimism.
Choi anticipated that the global market will rebound in the second half of 2023, in part because he thought that it had already reached its lowest point.
He stated, “We are laying on the floor.” It is quite simple for us to bounce back.
Choi observed that governments throughout the world are attempting to encourage initial public offerings in their individual countries, which might spark a comeback.
Choi said that Hong Kong Chief Executive John Lee recently visited Saudi Arabia and advised firms to consider listing in the city.
Whenever evidence of a more stable market with greater predictability emerges, investor confidence should return, according to EY’s statement.
The business warned that “prominent corporations who had postponed their IPO aspirations may re-enter the market, albeit at lower valuations.”