Equity Capital Markets update, October 2024

Dealogic data for the first nine months of 2024 reveal a mixed landscape in global ECM activity, with total deal volumes experiencing a moderate year-on-year increase despite a noticeable decline in Q3.

While follow-on offerings demonstrated resilience, the IPO market fell by almost a quarter, demonstrating that macroeconomic drivers and political pressures continue to drag on deal volumes.

With the Fed finally moving in to cut rates, what does the future hold for the global equity market?

Dealogic data point to a moderate increase in total deal volume in the first nine months of 2024 following a slow recovery from macroeconomic disruptions. Global ECM volumes reached $530 billion by September 2024, registering a 15% YoY increase, however deal count remained relatively flat, indicating a preference for fewer, larger transactions.

The year began with optimism, as ECM activity rebounded from 2023 levels. Global issuance volumes rose to $173 billion in Q1 2024 compared to approximately $139 billion in Q4 2023, helped by buoyant activity in technology, healthcare and renewable energy.

This resurgence carried over into Q2. The $198 billion in ECM deals priced during this quarter were considerably higher than the $166 billion figure in Q2 2023.

This recovery, though far from a full rebound, indicated a growing investor confidence as companies took advantage of improved market conditions to raise capital.

Despite the strong start, Q3 saw a noticeable slowdown in activity. According to Dealogic data, ECM volumes fell to around $160 billion, though they were slightly above Q3 2023 levels. Issuers were hesitant to launch new deals, leading to a more cautious approach to equity raisings overall.

Volatility played a key role in this deceleration. Several potential issuers postponed or downsized planned offerings due to fluctuating market conditions and fears of suboptimal pricing. European IPOs, for example, were hit by snap elections in France and other political events that injected uncertainty into the market. U.S. markets, while more resilient, still faced pockets of volatility due to high interest rates and concerns over potential economic slowdown.

The IPO market experienced a 24% year-on-year decline in volumes in the last three quarters, with volumes falling to roughly $78 billion. This decline was particularly stark between the second and third quarters of the year, when IPO volumes plummeted nearly two-fold.

Nevertheless, a handful of landmark IPOs still came to market, including, notably the Lineage, Puig Brands and Galderma Group offerings.

While IPOs have struggled, follow-on activity was healthy, reaching $361 billion by the end of September 2024, following a 22% year-on-year increase.

Saudi Aramco’s and National Grid’ follow-on transactions (both priced in June 2024), were the largest ECM deals so far in 2024.

North America maintained its position as the dominant region for ECM activity, accounting for approximately 41% of global deal volumes. U.S. markets saw a resurgence in transaction volumes following more favourable economic outlook and resilient investor appetite, especially for tech and healthcare deals. According to Dealogic, ECM volumes surged by approximately 49% y-o-y to nearly $216 billion over the last three quarters.

In Q3 2024, increased volatility and a natural slowdown were evident, yet there were encouraging signs. According to Dealogic, IPO issuance in North America in Q3 2024 still reached $11.8 billion, higher than Q2’s $10.7 figure billion, and better than the third quarter of the previous year.

In Europe, ECM activity was more subdued, reflecting the region’s struggle with sluggish economic growth, inflationary pressures and the ongoing impacts of the Russia-Ukraine war. According to Dealogic issuance totalled approximately $101 billion by the end of Q3 2024, and were largely flat compared to last year.

ECM activity fell from approximately $46 billion in Q2 to roughly $17 billion in Q3, largely due to the political turmoil and volatility seen over the summer. Several prominent offerings, including by luxury sneaker brand Golden Goose and fashion retailer Tendam, were postponed due to weak investor appetite, reflecting broader concerns over economic stagnation and political instability in key European markets.

The Middle East continued to experience resurgent ECM activity driven by privatisation efforts, alongside increasing focus on economic diversification. ECM volumes in the region rose by nearly 83% year-on-year to $23 billion, largely driven by siseable offerings in the energy sector. Landmark deals included follow-ons by regional behemoths Saudi Arabian Oil and ADNOC Drilling, as well as NDMC Energy’s IPO.

Asia-Pacific, on the other hand, experienced muted activity. Once a hub for IPOs, the region's market sentiment has cooled due to a combination of challenges, such as economic slowdown, rising interest rates and a lack of market liquidity.

The approximately $182 billion in deals that were priced in the last three quarters, represented a 13% decrease when compared to the same period last year.

There were signs for optimism, however, as the $61 billion worth of ECM deals priced in 3Q24 in APAC were slightly above 2Q24’s $59 billion figures. The tail end of the quarter also saw some prominent deals come to market, including the follow-on offerings from JD.com and Midea.

Additionally, India’s domestic IPO activity continued to boom, bolstered by the expanding tech sector. The country’s share of APAC IPOs hit at a record high of 35%, with 442 completed transactions valued at approximately $9.5 billion.

The overall outlook for ECM activity in Q4 2024 remains cautiously optimistic. With interest rates stabilising, coupled with a potential reduction in political tensions, a resurgence in activity towards the end of the year is possible. A key factor will be how market sentiment evolves in the lead up to and following the US elections.

The September decision by the US Federal Reserve to cut interest rates by 50bp should also impact the market positively.

The IPO pipeline remains strong, particularly in technology, AI and digital infrastructure, which could help drive a late-year recovery in ECM volumes. However, issuers are likely to remain cautious, with many choosing to delay offerings until market conditions improve.