IPO: Investors' Best Friend In 2020

A healthy IPO market is always good for the overall wellbeing of the equity markets. The year 2020 has been one of the most volatile years, almost comparable with the global financial crisis year i.e. 2008. In spite of the crisis that shook investors’ confidence in the first half of the year, the IPO markets showed a solid recovery in the second half, thus reviving investors’ interest in IPOs. Ganesh Vaybase discusses in detail how the IPO markets performed in 2020 while sharing the outlook for the IPO markets in the coming months

- Ganesh Vaybase

A vibrant IPO market is simply great for equity markets not only because it makes investors, both retail and institutional, more active in the markets but also because it throws some mouth-watering, money-making opportunities in the short term. The IPO market in 2020 has surprised investors with its stellar performance. In fact, the IPO activity in India gained momentum as benchmark indices recovered from the pandemic-influenced slump in equity prices at the beginning of the year. The IPO market showed recovery, not only in India but globally too.

Says Paul Go, EY Global IPO Leader: “Although IPO activity declined in April and May of the year 2020 because of the economy lockdown in most markets, we began to see a strong rebound in June. Well-prepared companies, in the right sectors and with sound business models, can successfully adjust during the pandemic, and will find the right window of opportunity amid turbulent capital markets for the rest of 2020.” The impact of the pandemic was seen in equity markets in the first half of 2020. The negative impact on equity prices played a significant role in declining IPO activity in the first half of 2020.

Globally, in Q2 2020 the IPO activity declined when compared to Q2 2019 across all geographies in terms of deal numbers and proceeds. The global IPO activity was seen slowing down in April and May of 2020 with a 48 per cent decrease by volume (97 deals) and a 67 per cent decrease in proceeds when compared to April and May of 2019. Such underperformance dragged down the IPO performance in the first half of 2020. The underperformance was seen despite a late flurry of deals globally in June.

A Grand Return