Global IPO activity hit record levels in 2021, but slowed slightly in Q4
Momentum is expected to continue in early 2022
However, macroeconomic headwinds including inflation and high energy prices could threaten the success of UK and global IPOs later in the year.
The main market continued to see a significant flow of IPOs in Q4, with 17 IPOs raising £1.9bn, surpassing the 15 IPOs in Q3, although Q3 proceeds were higher at £2.9bn. The Alternative Investment Market (AIM) also saw activity with a further 29 IPOs in the final quarter of the year raising £1bn. This brings total funds raised through IPOs in Q4 on both markets to £2.9bn.
The financial services, real estate and software sectors contributed the largest IPOs in the quarter, with Pantheon Infrastructure, Life Science REIT and Softline Holdings all raising £0.3bn to £0.4bn from their respective IPOs.
Follow-on activity reduced slightly in Q4 with existing issuers raising circa £6.5bn, bringing the annual total to over £32.7bn, with the money raised from rights issues declining from the peaks seen in 2020 and early 2021.
Scott McCubbin, EY UKI IPO Leader (pictured), comments: “Last year was an exceptional year for the UK IPO market, with companies taking advantage of the open market to list in record numbers.”
“The outlook for 2022 is much less certain, with a number of prevailing headwinds, including inflationary pressures, which are likely to lead to interest rate rises and a move towards bond markets with more attractive yields. Supply chain issues and weaker consumer spending due to energy price rises also threatens market strength and may lead to a weaker equity market later in the year.”
Global IPO activity has continued at a pace
Globally, 2021 was the most active year for IPOs in the past 20 years, with 2,388 deals raising US$453.3bn. In comparison to 2020, global IPO activity was up 64% and 67% by deal numbers and proceeds, respectively.
Europe, the Middle East, India, and Africa (EMEIA) exchanges recorded the highest growth in IPO activity among all regions (158% by number and 214% by proceeds), which reflected the pent-up demand held back as the European markets navigated Brexit and other geopolitical factors. The US continued to play a dominant role in driving this record global IPO year, while the contribution from Asia-Pacific was steady but relatively modest when compared to 2020, as regulatory changes stalled growth.
After the exceptional run during the first three quarters of 2021, global IPO activity slowed its frenetic pace in Q4 2021. In the quarter, IPO deal numbers and proceeds were 621 and US$112.2bn, respectively. This represented an increase of 16% by deal numbers and 9% by proceeds compared to Q4 2020.
Helen Pratten, EY Strategy and Transactions Partner, concluded: “The Global and London markets have shown exceptional resilience in delivering record IPO numbers against the uncertainty of the Covid pandemic. However, whether this resilience can continue as other adverse factors come into play whilst the threat of new COVID variants is still present is open to debate. It is therefore crucial that IPO-bound companies adopt a resilient and flexible strategy that can adapt to shifting market conditions and geopolitical tensions.”