The Strategist

Number of IPOs in 2019 turns out to be lowest in three years

01/08/2020 - 03:32

The number and volume of initial public offerings of companies held in 2019 turned out to be the lowest in the last three years. Besides, some large and promising placements turned into disappointment.

According to Dealogic, 1237 initial public offerings of companies were held in 2019, which is 20% less than in the previous year. This is the lowest figure in the last three years. The total volume of placements amounted to $ 188.8 billion, which is 10% less than in 2018, and is also the minimum figure for the last three years. The Financial Times states that a sharp reduction in the number of initial placements in 2019 is taking place against the backdrop of trade wars, an economic downturn and a decline in confidence in the stock markets, as opposed to direct and venture capital investments. 

If you look at the regions, then placements in Europe, the Middle East and Africa (EMEA) showed the sharpest decline in 2019: 179 IPOs, which is 40% below the level of 2018. 

Half of the total volume of placements in the EMEA region was provided by IPO Saudi Aramco for $ 25.6 billion, which became the largest in history. 

Placements on the London Stock Exchange fell by 62% compared to last year. This can be explained by the uncertainty amid the country's prolonged exit from the EU. “This clearly shows how the Brexit cloud is hanging over companies and their decision as to whether to conduct an IPO or not,” FT analyst EY quotes Paul Go. “We expect IPO activity in the UK to begin to gain momentum in the first quarter of 2020.” 

The number of IPOs in the Asia-Pacific region was at its lowest level in the last five years, while in the countries of North and South America the number of placements decreased by 15% compared to 2018. 

The situation with the IPO in the USA was affected by a partial halt in the work of the government and all public services (shutdown) at the beginning of the year. Then, companies wishing to enter the stock exchange could not obtain the necessary permissions from regulators. A number of placements, which were nevertheless held against the backdrop of trade wars and sluggish economic indicators, turned into a fall in the shares of the placed companies. So, the placement of Uber, which became the second largest this year, turned out to be almost the worst in the history of the New York Stock Exchange due to a significant reduction in the price of the company's shares. A similar situation has developed with Lyft shares, which after the placement fell by 30%. There were more serious drops in stock prices after the IPO. 

Meanwhile, experts interviewed by FT are confident that weak performance in 2020 will not affect investor appetite for an IPO in 2020. “A number of strong private technology companies are about to enter the stock markets in 2020,” said Greg Chamberlain of JPMorgan. “Many of them are crushing large markets, holding large stakes, and present interesting opportunities for investors.”