Will Global IPO Volume Bounce Back in the Second Half of 2023?

The allure lies in the potential for these companies to distribute profits to shareholders through dividends and for the share price to appreciate over time.

But investing in an IPO involves inherent risks. The share price can be volatile, especially during the initial trading days, which may lead to a decline in value. Additionally, there’s the risk that the company may not achieve the anticipated financial success, leading to a lack of significant growth.

What can we say about IPOs in the first half of 2023?

According to Ernst & Young, global IPOs volume and the amount raised between January and June 2023 decreased by 5% to 615 IPOs and by 36% to $60.9 billion respectively, compared to the same period last year. Out of the total number of IPOs, 77 came from the Americas, 371 from Asia-Pacific and 167 from EMEIA (Europe, the Middle East, India, and Africa).

Among the other key findings, companies in the Asia-Pacific are still dominating the field with around 60% share of all IPOs and emerging markets, such as China, India and Indonesia, are the ones offering the greatest opportunities for those looking to invest in recently listed companies, especially in the tech industries (even though other sectors are recently becoming increasingly popular, such as the renewable energy sector).

Will Things Be Different in the Second Half of 2023?

Three major IPOs in early July have brought hope for a potentially active second half of the year in Europe. Hidroelectrica, ThyssenKrupp’s Nucera division, and fintech Cab Payments collectively raised significant capital through their IPOs. Despite some cautiousness, these IPOs have shown promising results.

The contrast between this recent surge in IPO activity and the gloomy performance in the first half of 2023 is notable. Investors might wonder what to expect for the rest of the year in the IPO market.

According to Ernst & Young specialists, optimism surrounds the IPO market in the next 6-12 months. Interest rate hikes are believed to have peaked in many parts of the world, and the Chinese Government’s plans for further economic stimuli are expected to create favorable conditions, especially in one of the most active countries for IPOs. Mainland China and Hong Kong recorded 203 IPOs in the first half of 2023, representing a 7% year-on-year increase in volume.

Investors are likely to show interest in companies with strong fundamentals and established track records, particularly in thriving sectors like Artificial Intelligence, Green Energy, Pharmaceuticals, and those following Environmental, Social, and Governance (ESG) principles.

In their search for investment opportunities, they will also consider factors such as volatility, inflation trends, interest rates, market liquidity, global economic growth, geopolitical tensions, conflicts, and government policies and regulations.

Companies that are realistic about their valuations in light of the macroeconomic environment and the ever-changing regulatory environment have demonstrated resilience in adopting innovative and agile business models will be considered strong candidates.

How to Take Advantage of an IPO as an Investor

Before getting involved in an IPO, you need to thoroughly examine the relevant documents concerning the company, as they offer valuable insights into the company’s future strategies, financial health, and the broader business landscape in which it operates.

You also need to understand the motivations behind this IPO, as there are different reasons why a company might decide to go public.

An IPO serves as a vital means for companies to secure funds required for their long-term growth and various projects, including research and development efforts. It is an important milestone that not only brings in financial resources, but also offers strategic advantages to the company.

One significant benefit of going public is the opportunity to establish the company’s reputation, both at a local and international level. By becoming a publicly listed entity, the company gains credibility within its industry and among potential partners and stakeholders. This can open doors to valuable collaborations and influential new partners that can aid in the successful execution of the company’s strategic plans.

Furthermore, the process of going public through an IPO can create a positive impact on the company’s workforce. It can attract and retain talented and motivated individuals who are eager to be part of the company’s journey and share in its future successes.

For early investors and shareholders, an IPO can bring greater liquidity and the chance to realize their investments. Trading on the secondary market provides an avenue for them to buy or sell shares more easily, increasing overall liquidity and facilitating the management of their investment portfolios.

Another advantage lies in the expansion of the company’s shareholder base. Going public attracts a wider range of investors, including institutional and retail investors, diversifying ownership and potentially creating a more stable and supportive shareholder structure.

Lastly, an IPO can be used to optimize the company’s financial position. By raising funds through public offerings, a company can use the proceeds to pay down debts and improve its financial health, which, in turn, can increase its debt capacity and lead to more favorable borrowing terms.

When you’re ready to take part in an IPO, you can get your shares by reaching out to your financial intermediary that will secure them in a specified account after the offering concludes. Additionally, you have the option to capitalize on the secondary market and trade shares through CFDs on shares, with platforms like ActivTrades providing such opportunities.

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