Q3 2021 saw 18% more deals than the previous third quarter record set in 2007, and 11% higher proceeds than the last record-setting third quarter in 2020. In Q3 2021 alone there have been 547 IPOs raising US$106.3b. Year-to-date (YTD) there have been a total of 1,635 IPOs raising US$330.7b, an 87% and 99% increase year-on-year, respectively. Overall, Q3 totals YTD have already surpassed 2020 by both deal numbers and proceeds.
A key driver of activity in the third quarter was the rebound of IPO markets in Europe, Middle East, India and Africa (EMEIA), particularly Europe, India and Tel Aviv exchanges, as well as IPO candidates racing to raise capital before expected tapering begins. With the exception of the Europe market, the special purpose acquisition company (SPAC) pause seen in Q2 has extended to Q3.
In the Americas, the traditional IPO market has continued at an accelerated pace, with 409 IPOs raising US$133.6b. In the Asia-Pacific region, while there are some signs of a market slowdown, the region continues to be active, producing 750 IPOs raising US$123.4b YTD. Meanwhile, the EMEIA region is experiencing a steady stream of activities with 476 IPOs raising US$73.7b.
From a sector perspective, technology, health care and industrials once again rose to the top of the pack retaining their firm grasp on investor attention. For the fifth consecutive quarter since Q3 2020, technology generated the highest year-to-date number of deals (419), raising the highest amount in proceeds for the sixth consecutive quarter, from Q2 2020 (US$116.4b). Health care followed with 287 IPOs raising US$49.2b by proceeds, and industrials came in third with 204 IPOs raising US$35.3b by proceeds.
“In Romania, new all-time highs reached at the end of September 2021 for all listed companies. The market capitalization stood at USD 51bn, while BET index reached a new record with a YTD increase of 29%.
The investment activity on Bucharest stock exchange continued to witness an upward trend in Q3’21 with corporate bonds predominating the listings. There were 8 issues of bonds for a total amount of USD 315,5m, Raiffeisen Bank being the largest issuance (USD 289,8m). The Ministry of Public Finance continued with another round of sales of government bonds for the population, attracting a total amount of USD 217,1m. The interest in listing on the alternative segment, AeRO, remained high with 7 new launches that totaled USD 76,8m from sectors like technology (Arctic Stream and Connections Consult), professional firms & services (Air Claim and Appraisal and Valuation), real estate (One United Properties), consumer products & retail (Visual Fan) and diversified industrial products (Adiss).
At 9M’21, the total number of listed companies stood at 19 with a total value of USD 170,3m, while for bonds there were 27 issues for a total amount of USD 1,3bn (incl. government bonds)”, says Andrei Eftimie, Associate Partner, Capital Debt Advisory, Strategy and Transactions, EY Romania.
Americas IPO activity maintains hot streak
IPO activities in the Americas are not slowing down. 2021 continues to beat the most active 20-year record by deal numbers and proceeds. YTD, the Americas has seen 409 IPOs raise US$133.6b by proceeds, a 118% and 113% respective increase year-on-year. The health care sector saw the most deals with 143 IPOs raising $29.0b, and technology saw the highest proceeds raised (US$60.2b) by 122 IPOs.
While SPAC activity in the US remains elevated, it is not quite at the same breakneck speed seen at the end of 2020 and in Q1 of this year. Transactions continue to be announced daily, but the SPAC market is facing some headwinds: an oversupply of SPACs has created bidding wars, tepid trading performance, lower trading liquidity and the private investments in public equity (PIPE) market has softened while facing increased regulatory and congressional scrutiny. The SPAC market will continue to be an attractive option for the public market, though closing deals may become harder for SPAC sponsors.
The US continues to see strong growth YTD with 323 IPOs, a 117% increase year-on-year, which raised US$117.3b by proceeds – up 110% year-on-year. Meanwhile, Brazil’s B3 exchange also performed strongly, with 44 IPOs raising US$11.4b, a 144% and 157% respective increase year-on-year.
Asia-Pacific holds steady despite volatility
While the Asia-Pacific region maintained steady momentum through Q3, the region may soon experience a slow down due to geopolitical tensions and ongoing volatility that is expected to continue. YTD, the region has recorded 750 IPOs, an increase of 35% year-on-year, which raised US$123.4b by proceeds – a 44% year-on-year bump. Technology is the most active sector in the region by both deal numbers (154 IPOs) and proceeds (US$34.3b).
Greater China continued to see gains YTD, with 444 IPOs raising US$94.1b by proceeds, a 13% and 20% respective increase. While activity continues to increase, the market experienced a complete halt of cross-border IPOs from China into the US market during this quarter, impacting both the Asia-Pacific region and the Americas.
Japan experienced a 50% increase in IPOs (81) and a 195% increase by proceeds (US$4.0b) through the third quarter. This acceleration is owed to high liquidity, strong local stock market performance and improving sentiment in part due to the successful hosting of the 2020 Tokyo Olympics, despite a lack of stimulus funds from the government and the economic impact of the COVID-19 pandemic.
EMEIA makes a significant contribution to global activities
The significant growth in the region compared to Asia-Pacific and the Americas shows that the EMEIA markets are not immediately reactive to activity experienced by the rest of the world. When it comes to the sectors in the region, technology far outpaced the rest with 143 IPOs raising US$21.9b by proceeds.
The UK is experiencing a swell with 66 IPOs (a 633% increase) raising US$15.9b by proceeds which increased 124% year-on-year. India is also seeing great momentum with 72 IPOs raising US$9.7b, reflecting a 200% and 331% respective increase. The Middle East and North Africa (MENA) regions, in particular, the Tel Aviv Stock Exchange, also saw notable gains with 88 IPOs raising US$5.3b, an increase of 340% by deals and 242% increase by proceeds.
Q4 2021 outlook: strike while the market remains favorable
As we near the end of 2021, a few uncertainties lie ahead that could increase market volatility and challenges for a successful IPO. In the meantime, while we expect a steady pipeline of deals to continue, companies should be looking to make the most of the favorable market conditions and go public. However, a host of uncertainties remain: geopolitical tensions, regulatory changes in flux, inflation risks and tapering by the US Federal Reserve. At the same time, new variants of COVID-19 are disrupting a full global economic recovery, and a majority of the sectors are affected.
Serious IPO candidates should look to prepare themselves as early as possible and be ready to launch quickly, if needed. While preparing, they should be realistic about the right path for the company and consider alternatives as needed. Finally, as organizations review their strategic priorities, environmental, social and governance (ESG) goals must be addressed as investors now consider these to be imperative.