The first quarter of 2024 has been a period of cautious optimism in the global IPO market, marked by a significant shift in market share and an increase in average deal size. Despite a 7% fall in global IPO volumes, the proceeds were up by 7% year-over-year (YOY), indicating a selective thaw in the market and growing confidence among issuers and investors.

The Shift in Global IPO Market Share

The global IPO landscape has witnessed a major shift in market share from the past five years. In Q1 2024, the Americas and EMEIA (Europe, the Middle East, India, and Africa) IPO markets had a bright start, pushing global IPO proceeds up by 7%. This was in contrast to the Asia-Pacific region, which usually leads in energetic IPO activity but displayed a 7% YOY decline.

Americas and EMEIA: A Bright Start

The Americas continued to exhibit strong performance in IPO activity compared with both the previous quarter and Q1 2023. The EMEIA region’s IPO count surged, primarily driven by India’s heightened activity, which led in global IPO proceeds and generated all four global mega IPOs this quarter.

Asia-Pacific: A Slow Start

Conversely, IPO markets across the Asia-Pacific region started the year on a weak note, with Japan being a notable exception. Mainland China and Hong Kong experienced a pronounced slowdown in the first quarter, due to unfavorable market conditions resulting from low liquidity, increased capital outflow, a temporary halt of IPO activity in Mainland China, and a high-interest rate environment in Hong Kong.

Cautious Optimism in the Market

The year began on a cautiously optimistic note, with a selective thaw following a period of dormancy. Market participants are navigating uncertainties stemming from recent economic fluctuations, heightened geopolitical tensions, and a global election year. However, stock markets in some major economies are booming as investors are pricing in the potential reduction of interest rates.

Valuation Expectations

Over the years, the IPO landscape has seen a shift in valuation expectations between buyers and sellers. Sellers have lowered their expectations toward valuations as they come to terms with the reality of the market’s aptness to align value in a tight money environment. On the other hand, stock markets in some major economies are booming as investors are pricing in the potential reduction of interest rates.

Increase in Average Deal Size

An important trend to note in Q1 2024 is the increase in average deal size, which is up by 26% from 2023. This reflects an improvement in valuations and pricing levels, indicating growing confidence among both issuers and investorshttps://www.ey.com/en_gl/insights/ipo/trends. Momentum is building for private equity (PE)-backed IPO exits in 2024, with the market showing signs of recovery and more aligned valuation expectations between buyers and sellers.

Private Equity-Backed IPO Exits

Momentum is building for private equity (PE)-backed IPO exits in 2024. This is a clear sign that the market is recovering and that there is more alignment in valuation expectations between buyers and sellers. The increase in average deal size is a testament to the growing confidence among both issuers and investors.

Conclusion

The first quarter of 2024 has set a tone of cautious optimism in the global IPO market. With the shift in market share, the increase in average deal size, and the alignment of valuation expectations, the market is poised for a selective but definitive thaw. As we move forward, it will be interesting to observe how these trends develop and shape the IPO landscape for the rest of the year.