As the number of IPOs plunged in the United States this year, related activity has shifted eastward with China's market showing more vibrancy, experts said on Monday.
According to Morgan Stanley's technology equity capital markets team, Wednesday will mark the 238th day without a tech IPO worth more than $50 million in the U.S..This, they said, reflects the longest ever tech IPO drought in the U.S. stock market.
This record will erase the previous ones set during the 2007-09 Global Financial Crisis and the 2000"dotcom crash", said Morgan Stanley experts.
The U.S. stock market reported 92 IPOs during the first half, down 78 percent year-on-year, representing the weakest six-month period for IPO activities in five years, according to U.S. financial data provider FactSet.
The decline in IPO gross proceeds was "even more stark" in the first six months, as total financing plummeted by 96 percent year-on-year to a mere $9 billion, said FactSet.
Sara Potter, a FactSet economic contributor, said the U.S. stock market suffered its worst half-year since 1970, with the S&P 500 index down 21 percent by June 30 and Nasdaq down by nearly 30 percent.
The sharp decline in IPOs from special purpose acquisition companies－SPACs－has also dampened the U.S. IPO market, with total proceeds contracting from the peak of $1.13 trillion in the first half of 2021 to $677.25 million so far this year.
The pullback in IPOs from Chinese companies on U.S. exchanges has also affected IPO activity in the U.S., Potter said. The unresolved audit supervision dispute between Chinese and U.S. regulators has slowed Chinese companies' listing pace in the U.S.. While 47 Chinese companies debuted on the U.S. stock market in the first half of 2021, the number shrank to just four during the same period this year.
U.S. Securities and Exchange Commission Chair Gary Gensler was quoted by The Wall Street Journal on Friday as saying that the U.S. Public Company Accounting Oversight Board will start reviewing the audit files of U.S.-listed Chinese companies this week. The review will take eight to 10 weeks to finish. Alibaba, JD and Yum China Holdings will figure in the review, the Journal reported.
Meanwhile, the IPO scene in Asia has improved this year, said professional services provider Deloitte. The Shanghai Stock Exchange is set to see 114 IPOs worth HK$355.1 billion ($45.2 billion) by the end of the third quarter, securing the world's top position, which it held in the first half of the year.
Shenzhen will retain its position as the world's second-largest IPO venue in terms of proceeds－HK$193.8 billion from 140 IPOs by the end of this month.
Stock exchanges in South Korea, Hong Kong and Dubai will trail Shanghai and Shenzhen, while Nasdaq will rank eighth and the New York Stock Exchange will be relegated to 12th place, according to Deloitte.
Chinese technology companies have been able to raise adequate funds from China, thanks to the registration-based IPO mechanism that started in June 2019.The new system has become a major driver of A-share IPOs this year, said Jonathan Zhao, eastern region A-share IPO leader from Deloitte China.
Combined with the various economic stimulus measures introduced earlier this year, the total IPO financing in the A-share market is likely to see a record this year, he said.