Merging company

Asia takes the lead even as global IPO market shrinks

SINGAPORE/HONG KONG/SEOUL — New business listings have slowed significantly in Asia in recent months after a rapid start.

While revenue from new listings in the first quarter was 18% higher this year than in 2021, lower Asia-Pacific IPO activity in the second quarter pushed revenue for the year up as of June 14 at $50.5 billion, 26% below the total at the same time last year, according to Dealogic data.

The year has seen 356 primary new listings so far, down 31% from 2021.

By comparison, Dealogic’s global IPO count is 53% below 2021 levels, with proceeds down 72%. The United States and Europe each account for just one of the top 10 IPOs of the year, leaving Asia to dominate the top ranks.

Market turmoil stemming from Russia’s invasion of Ukraine in late February, fresh COVID outbreaks, spiraling inflation and monetary tightening have kept many IPO hopes on the sidelines in recent weeks. .

“Many organizations have taken a ‘wait and see’ approach to economic recovery and have postponed fundraising activities due to market uncertainties,” said Eddie Wong, Hong Kong Capital Markets Services Partner for PwC. Edward Au, Deloitte’s managing partner in southern China, said his firm “now expects a sharp decline in the number of new listings and revenue generated in Hong Kong in 2022.”

PwC also cut its forecast for primary listing revenue in Hong Kong this year to between HK$180 billion ($22.93 billion) and HK$200 billion, half the level forecast at the start of the year. the year.

Hong Kong, the world’s top IPO market in 2019, is not even in the top 10 this year. The city has seen 22 major new listings so far, down 53% from last year, amassing around HK$17 billion together.

In a twist, four New York-listed Chinese companies have secured backup listings on the Hong Kong Stock Exchange “as an IPO” – a quick method in which they forgo raising new money while still protecting against a possible American ejection.

With Hong Kong’s demise, Shanghai’s STAR market has become the world’s most active IPO market, with $14.37 billion raised so far, surpassing the market’s $12.61 billion Nasdaq stock.

But the New York Stock Exchange saw twice as many new listings as STAR. New additions to the Shanghai stock exchange are down 44% from a year ago, despite the board being the only global market to have hosted two of the top 10 IPOs: Panel maker Jinko Solar and integrated circuit designer Suzhou Novosense Microelectronics. Unlike in the past, prices for most new STAR listings fell after the companies went public.

South Korea has seen a series of big companies scrap their IPO plans, including Hyundai Engineering and cybersecurity firm SK Shieldus, each seeking more than 1 trillion won ($775 million).

“We have seen investor confidence decline rapidly over the past several months due to growing uncertainty in global macroeconomic conditions,” SK Shieldus said. “We have decided not to go public anymore and to review the plan in the future when the value of the company is properly assessed. »

The Korea Stock Exchange had nine delistings, with just one new corporate listing and one for a real estate investment trust, compared to 15 IPOs last year. Still, LG Energy Solution’s $10.73 billion IPO ranks as the world’s largest so far this year, according to Dealogic.

IPO candidates have also grown nervous about other Asian markets. In Japan, trade enablement startup AnyMind Group in March canceled its listing on the Mothers section of the Tokyo Stock Exchange, which was to value the company at 60 billion yen ($446 million).

“The willingness of institutional investors to buy stocks in the secondary market is rapidly declining and the post-listing stock price is unpredictable,” an AnyMind executive said. “If the share price stagnates significantly, our capitalization policies could be called into question.”

India, meanwhile, hosted the second largest IPO in the region, with the $2.72 billion IPO of state-owned Life Insurance Corp. of India. South East Asian offerings were dominated by the $957m stock sale on GoTo’s Indonesia Stock Exchange, which was formed by the merger of ride-hailing service Gojek and e-commerce platform Tokopedia.

Despite the recent slowdown, PwC expects business in Hong Kong to return to normal levels in the second half of the year, with at least three HK$10 billion deals and twice as many in the HKD range. HK$5-10 billion.

Three share sales are currently underway, including the HK$671 million offering from intra-city logistics service GoGoX, which is expected to list on Friday.

This month, Hong Kong saw its second Special Purpose Acquisition Company (SPAC) listing. Claudius Tsang, managing director of A SPAC Holdings, plans to list another such vehicle in the city soon.

Some like Tsang believe that Chinese companies listed in New York could choose to save their position by merging with Hong Kong SPACs instead of the conventional listing route.

“As SPAC listings can provide greater valuation certainty, these companies may prefer to list through SPACs rather than the traditional route in order to meet the valuation expectations of company owners,” Au said. from Deloitte.