London IPO proceeds fall 90% as Asia-Pacific leads

IPO activity on the London stock markets fell 90% by proceeds and 62% by number of listings in 2022 when compared to the record highs of 2021, according to EY’s latest market tracker, IPO Eye.

The report showed global IPOs were 61% lower than 2021 in terms of funds raised, with significant declines experienced in the Americas where IPO proceeds were 95% lower than 2021.

It said macroeconomic headwinds are likely to dampen UK and global IPOs in early 2023, but pent-up demand may lead to more IPOs in the second half of the year.

“The London stock markets witnessed a significant decline in IPO activity in 2022, with just 45 issuers listing during the year, a 62% decline when compared to the record 119 recorded in 2021,” said EY.

“The listings raised £1.6bn in total, down from the £16.3bn raised in 2021 …

“In the final quarter of 2022, the main market saw nine IPOs raising £380mn, with the market experiencing minimal activity.

“The Alternative Investment Market (AIM) also saw limited activity in Q4, with just two IPOs raising £24mn between them.

“This brings total funds raised through IPOs in Q4 on both markets to £404mn.

“The UK stock market continues to be affected by macroeconomic headwinds, including geopolitical tensions and rising inflation and associated interest rate rises.”

EY UKI IPO leader Scott McCubbin said: “2022 was a very difficult year for the UK IPO market, with the adverse macroeconomic and geopolitical environment leading to a relative pause in IPO activity towards the end of the year.

“The outlook for 2023 remains uncertain.

“The continuation of the prevailing headwinds experienced in late 2022 – including inflationary pressures, rising interest rates, supply chain issues and weaker consumer spending due to high energy price rises – are likely to lead to depressed IPO activity early in the year.

“However, there remains pent-up demand for IPOs, so we may see an upturn in the market in the second half of the year if we avoid further geopolitical shocks.”

The report showed that globally, there were 1,333 IPOs in 2022, raising $179.5bn which is 45% lower in terms of the number of IPOs and a 61% decline in terms of proceeds compared to 2021.

In Q4, the trend was similar with 334 IPOs globally (proceeds of $31.9bn) which is 50% lower than the number of IPOs and 73% in proceeds compared to Q4 2021.

Asia-Pacific accounted for 63% and 69% of global IPO numbers and proceeds respectively in 2022.

“The region has been less affected than the rest of the world by inflationary pressures, although it is still behind its 2021 performance with IPOs 26% behind by deal numbers and 31% by deal size,” said EY.

“In contrast, the Americas region has struggled, with IPO proceeds 95% lower than in 2021, while the Europe, the Middle East, India, and Africa (EMEIA) exchanges were also markedly down on 2021, with proceeds 78% lower.”

Debbie O’Hanlon, EY UKI private leader, said: “The Global IPO outlook remains difficult in the short-term.

“Investors have spurned new public companies and turned to less risky asset classes as they try to navigate higher inflation and rising interest rates.

“As the pipeline continues to build, many companies are waiting for the right time to revive their IPO plans.

“However, with tightening market liquidity, investors are more risk averse and are looking to invest in companies that can demonstrate resilient business models in profitability and cash flows, while also articulating their ESG agendas.”