The global initial public offering (IPO) market has displayed remarkable resilience in the third quarter of 2024, despite ongoing market volatility, geopolitical tensions and a global economic slowdown.
While the overall volume of IPOs has dipped year-over-year, it climbed compared to the prior quarter, signaling cautious optimism among market participants.
According to the EY Global IPO Trends report for Q3 2024, the number of IPOs fell by 14 percent to 310, with proceeds decreasing by 35 percent to US$24.9 billion compared to the same period last year.
However, this quarter saw a 11 percent increase in the number of IPOs launched from the previous quarter, indicating a possible recovery.
The report also highlights how a gradual easing of interest rates and changes in investor sentiment have contributed to this uptick.
As inflationary pressures begin to recede and economic growth becomes a priority, the easing cycle initiated by central banks in major economies could provide the necessary momentum for companies considering initial public offerings. Lower interest rates reduce the cost of capital, making it more attractive for firms to raise funds, including through IPOs.
Americas, EMEIA region see IPOs surge while Asia-Pacific struggles
The Americas saw a total of 57 IPOs in Q3 2024, a 39 percent increase from 41 in Q3 2023. However, the proceeds dropped from US$9.2 billion to US$8.4 billion, an 8 percent decline.
On a global scale, the Americas region saw an uptick, accounted for 18 percent of IPOs globally compared to 11 percent year over year. Its share of proceeds was even larger, capturing 34 percent of global IPO proceeds compared to 24 percent in Q3 2023.
Meanwhile, the Europe, Middle East, India and Africa (EMEIA) region recorded 144 IPOs — a 20 percent increase from 120 in Q3 2023 — but saw proceeds decrease from US$8.2 billion to US$6.9 billion, representing a 16 percent drop.
Globally, the EMEIA region represented 47 percent of all IPOs, up from 34 percent a year prior.
Contrary to the notable successes of the preceding regions, the Asia-Pacific experienced a significant downturn.
The region only recorded 109 IPOs in Q3 2024, a steep 45 percent decline from 198 in Q3 2023. Proceeds also fell sharply from US$20.9 billion to US$9.6 billion, a 54 percent fall.
Cross-border IPO listings gain traction
Cross-border listings have gained momentum, reflecting a growing trend of international companies choosing to list in more favorable markets.
In the first three quarters of 2024, 77 companies opted for overseas listings, marking a 20 percent year-over-year increase. This trend has been particularly pronounced in the US market, which has attracted more foreign listings than ever, driven by strong liquidity and more advantageous valuations, EY analysts explained.
In fact, foreign-domiciled issuers account for approximately 52 percent of IPOs on US exchanges since 2023, highlighting a strategic shift by international firms seeking better market conditions.
Moreover, stock exchanges worldwide are adapting their listing regimes to accommodate evolving business landscapes.
The UK introduced significant reforms to enhance its competitiveness this year, while the Hong Kong Exchange relaxed listing requirements to attract IPOs from specialist technology firms.
Sector-specific IPO dynamics
The current market landscape has led to a broadening of the IPO sectors, allowing for a more diverse range of investment opportunities.
Sectors less affected by rate fluctuations, such as industrials, materials and energy, have shown resilience during monetary tightening phases.
On the other hand, capital-intensive sectors, including health, technology and real estate, experienced significant declines in their global shares due to rising borrowing costs.
As the interest rates decrease, these sectors seeing renewed activity in IPO activity, potentially leading to more robust investor engagement.
IPO outlook for Q4 2024 and beyond
Looking ahead, the IPO landscape in Q4 2024 and beyond is expected to be influenced by central bank policies, geopolitical developments and key election outcomes.
Optimism is fueled by the prospect of lower interest rates and easing inflation, which are anticipated to encourage new listings and revive sectors sensitive to borrowing costs. Major markets, including the US, Europe and India, are poised to continue their strong performance, bolstered by increased investor interest and favorable economic conditions.
More crucially, the AI sector remains a focal point for IPO activity, with nearly 50 AI companies currently in IPO registration and sustained investor enthusiasm.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.