Philippine firms have shelved their initial public offerings this year due to the pandemic in contrast to the robust number of companies that went public elsewhere globally undeterred by the real threats of the COVID-19.
According to an EY quarterly report, EY Global IPO Trends Q3 2020, worldwide IPOs during this year’s third quarter, traditionally a slow quarter, was the most active in the last two decades by proceeds and the second highest third quarter by deal numbers.
The report cited the third quarter of 2020, which bucked the traditionally slow initial public offering period as the global market was awash with liquidity.
Globally, year-to-date IPO activity accelerated, resulting in a 14 percent increase in the total number of IPOs to 872, and an impressive 43 percent rise in proceeds of US$165.3 billion.
IPO activity in the Americas saw 188 deals raise US$62.4 billion in proceeds, increasing 18 percent and 33 percent, respectively YTD, while Asia-Pacific saw 554 IPOs raise US$85.3 billion in proceeds, rising by 29 percent and 88 percent, respectively YTD. Both markets have already exceeded YTD 2019 levels.
While the EMEIA region rose quarter on quarter, IPO volumes are still down YTD by 27 percent (130) and proceeds by 24 percent (US$17.6 billion), respectively.
IPOs during the period grew in the Asia-Pacific region as well as in ASEAN alone, except for the Philippines which continues to struggle in controlling the pandemic.
In contrast, many companies in the Philippines have shelved their plans to go public considering the effect of the pandemic on local businesses and the overall economy.
SGV & Co Partner – Capital Markets Dolmar C. Montanez noted, “Only 2 companies completed their IPOs this year, with a total size of approximately US$278 million. We expect to see another initial listing by the end of October, which is expected to be the biggest since 2016.”
“What is noteworthy is the landmark listing of the first REIT in the country 10 years after the REIT law was passed by Congress,: said Montanez adding that, “The REIT IPO listing may encourage other real estate players to convert their current real estate portfolios into REITs, which may positively impact the local bourse’s recovery from the effects of the pandemic.”
YTD 2020 Asia-Pacific IPO activity has surpassed YTD 2019 activity by both volume (29 percent) and proceeds (88 percent).
Activity in the region accelerated in part due to COVID-19 pandemic-related government stimulus policies, for example, employment subsidies provided to airlines in the region.
In Greater China, third quarter 2020 IPO activities are on track to hit historic highs with deal numbers and proceeds up 152 percent and 139 percent, respectively year-on-year.
As US-China trade tensions heighten leading up to the US presidential election, some Chinese companies listed on US exchanges chose to conduct a secondary listing on the Greater China exchanges, tapping into the Chinese equities market.
The market in Japan has also intensified compared to the third quarter of 2019 with a 67 percent increase in numbers and 40 percent rise in proceeds.
Across Asean, there were 77 IPOs raising US$4.3 billion YTD, reflecting a slight dip in volume (down 13 percent) but an improvement in proceeds (up by 12 percent) compared to the same period last year.
In the third quarter of 2020, there were a total of 33 IPOs raising US$1.1 billion across Asean, up 175 percent in volume and 491 percent in proceeds from the second quarter of 2020.
While Malaysia saw steady improvement in overall activity, the economic impact of the COVID-19 pandemic has been significant, particularly in Indonesia and Thailand. As a result, the region may take an extended time to recover.
That said, Indonesia has one IPO in the pipeline that could raise US$500 million before the end of the year, and Thailand has several sizeable IPOs in the pipeline that could go public in the fourth quarter of 2020.
EY Asean IPO Leader Max Loh said “Robust IPO activity in the third quarter of 2020 suggests that Asia-Pacific companies are seizing opportunities to go public to enhance resilience and improve their capital base for investments and growth.”
He added that, “The strong valuations seen in some of the recently listed ‘new economy’ companies and those not impacted by the pandemic are giving positive signals to other potential IPO candidates looking to complete to their transactions in the quarters ahead.”“Asean IPO numbers are lagging behind those of other Asia-Pacific markets but with economic recovery and strong fundamentals, there are positive indicators that IPO momentum should follow,” Loh noted.