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The Global IPO Landscape: Exploring Opportunities Beyond the Domestic Market

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Introduction

An IPO (Initial Public Offering) is the process of offering shares of a private company to the public for the first time. IPOs are often seen as a way for companies to raise capital, increase their visibility, and attract talent. However, IPOs are also complex and risky endeavours, requiring careful planning, preparation, and execution.

The global IPO market is constantly evolving, influenced by various factors such as economic trends, regulations, investor sentiment, and technological innovations. In this blog post, we will explore the global IPO landscape in 2023, highlighting the main challenges and opportunities for companies looking to go public beyond their domestic market.

Global IPO Trends

According to EY, the global IPO market ended 2023 with 1,298 IPOs raising US$123.2b. This represents a slight decrease in volume and a significant decrease in proceeds compared to 2022, which saw 1,363 IPOs raising US$185.4b. The slowdown in IPO activity was mainly due to the rising interest rates, inflation, and geopolitical uncertainty, which made investors more cautious and increased the cost of capital for companies.

However, the global IPO market also showed signs of improvement and resilience, with deal activity picking up in the third quarter and several high-profile deals in the pipeline. Some of the notable IPOs in 2023 include:

  • Arm, the British semiconductor company that raised $4.9b in the largest tech IPO of the year.
  • Instacart, the grocery delivery company that raised $2.6b in its IPO.
  • Rivian, the electric vehicle maker that raised $11.9b in the largest U.S. IPO of the year.
  • Zomato, the Indian food delivery platform that raised $1.3b in the largest Indian IPO of the year.

The global IPO market also witnessed some emerging trends and themes in 2023, such as:

  • The rise of SPACs (Special Purpose Acquisition Companies), which are shell companies that raise funds through IPOs and then merge with private companies, allowing them to go public faster and with less regulatory scrutiny. SPACs accounted for 28% of the global IPO volume and 18% of the global IPO proceeds in 2023.
  • The dominance of the technology sector, which accounted for 31% of the global IPO volume and 35% of the global IPO proceeds in 2023. Technology companies benefited from the increased demand for digital solutions and services amid the COVID-19 pandemic and the subsequent recovery.
  • The diversification of the global IPO market, with more companies from emerging markets and different sectors going public beyond their domestic market. For example, India saw a record-breaking 425% surge in IPOs in the third quarter of 2023, raising $1.77b. Moreover, sectors such as healthcare, consumer, and industrials also saw increased IPO activity in 2023.

Opportunities and Challenges for Going Public Beyond the Domestic Market

As the global IPO market becomes more diverse and dynamic, companies may find new opportunities and challenges for going public beyond their domestic market. Some of the potential benefits of pursuing a cross-border IPO include:

  • Accessing a larger and more liquid capital market, which may offer higher valuations, lower costs, and more flexibility for the company.
  • Enhancing the company's global brand, reputation, and visibility, which may attract more customers, partners, and talent.
  • Diversifying the company's shareholder base, which may reduce the dependence on a single market and increase the stability and resilience of the company.

However, going public beyond the domestic market also entails some challenges and risks, such as:

  • Complying with different and complex regulatory and legal requirements, which may increase the time, cost, and complexity of the IPO process.
  • Adapting to different and changing market conditions, investor preferences, and cultural norms, which may affect the demand, pricing, and performance of the IPO.
  • Managing the operational and strategic implications of being a public company in multiple jurisdictions, which may require more resources, governance, and oversight from the company.

Conclusion

The global IPO market is a dynamic and evolving landscape, offering both opportunities and challenges for companies looking to go public beyond their domestic market. Companies need to carefully weigh the pros and cons of pursuing a cross-border IPO, and prepare themselves for the complex and risky process. Moreover, companies need to monitor the global IPO trends and themes, and adapt to the changing market environment and investor expectations.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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