Reports of IPOs' death have been greatly exaggerated

Reports of IPOs' death have been greatly exaggerated
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Exchanges around the globe are eagerly awaiting the listing decision of the initial public offering (IPO) of Saudi Aramco, the Saudi state-owned oil company.

Hong Kong, London, New York and Tokyo are vying to list the IPO of the company expected to have a valuation in the trillions. Even if a small percentage of the firm goes public, it will be the largest initial public offering in history. 


The current record for the biggest IPO in the world is held by Alibaba, listed on the New York Stock Exchange in 2014. After losing the Alibaba listing for corporate governance reasons, Hong Kong has now changed its rules to allow dual-class structures.


Strong performance of global stock markets in 2017 has set the stage for a strong public offerings market in 2018. Several companies valued at more than $1 billion — the “unicorns” — are expected to go public.

China and the United States account for a large proportion of the world’s unicorns. This welcome news comes on the heels of concerns raised in the U.S. about the loss of listed companies.

Global competition for IPOs

In 2017, there were 1,624 IPOs raising $188.8 billion relative to 1,974 IPOs that raised $338.4 billion in 2007. Asia-Pacific accounted for 58 percent of the deals and 39 percent of the proceeds according to Ernst & Young

The top five exchanges by IPO proceeds raised were New York, Shanghai, Hong Kong, Shenzhen and London. Hong Kong was the top IPO destination based on number of IPOs, the United States was the leader based on proceeds and companies from mainland China issued the most IPOs outside the home country.

However, cross-border listings have been declining as several home markets have become more sophisticated and now provide a viable option. Global economic growth and strong stock market performance are expected to lead to a vibrant IPO market in 2018.

The competition for listings has become global in scope, with exchanges competing to get business. The major exchanges in New York, London, Tokyo and Hong Kong are now well positioned to attract IPOs from around the world. In addition, exchanges in other countries, like India, are also emerging as leaders and capturing market share.

Destination for IPO listings

Hong Kong lost out the top spot for IPOs to New York in 2017. Several changes in listing requirements should help it attract large tech IPOs in the future. In addition to discarding the one-share-one-vote rule for the largest companies, changes in Hong Kong’s listing rules also will make it easier for founders to control their firms.

The exchange is off to a good start in 2018 and is expected to list the IPO of the Chinese smartphone firm, Xiaomi, valued at over $100 billion. The U.S. markets continue to be leaders with greater depth and availability of capital.

Retail investors play a much larger role in Hong Kong and China relative to New York and London. Trading by small investors makes the markets more volatile. In the United States, 75-80 percent of an IPO is allocated to institutional investors

Several unicorns based in the United States and China are expected to go public in the near future. The competition to attract their listings will be intense. There is home-country bias in listings, with issuers more likely to list in their homelands.

Both New York Stock Exchange and Nasdaq will attract some of the hot tech IPOs in the United States. Asian exchanges, including Hong Kong and Shanghai, also are well-positioned as attractive IPO destinations.

Large IPOs tend to grab headlines, but offerings by small and medium-sized issuers are important engines of economic growth, and bourses are adjusting their structures to make it easier for these firms to raise capital.

Reena Aggarwal is vice provost for faculty at Georgetown University, as well as Robert E. McDonough professor of Finance and director of the Georgetown Center for Financial Markets and Policy at the McDonough School of Business.