Global Technology IPO Review: Q3 2014

Global Technology IPO Review: Q3 2014

Q3 results

Global technology IPOs set a new record at US$24.8bn in proceeds during Q3’14, increasing 105% from the prior quarter as a result of Alibaba, the largest IPO on record. Third-quarter IPO activity is typically slow due to the summer months which contributed to a sequential decline in technology IPOs from 40 in Q2’14 to 18 in Q3. On a year-over-year basis, Q3’14 IPO volume increased by 50%. Geographically, China dominated the technology IPO market with ten IPOs. Europe had four and the US had just two IPOs.

IPO summary - Top 10 deals
IPO summary - Top 10 deals
 

Subsector distribution

In the third quarter the Internet Software & Services and the Software subsectors garnered the most IPOs with six each, and proceeds of US$22.8bn and US$1.3bn, respectively. Excluding Alibaba’s US$21.8bn IPO (96% of the sector proceeds), the Internet Software & Services subsector raisedUS$1.0bn. These sectors remain at the forefront of investment activity as increased consumer demand in the developing economies along with increasing Internet penetration is resulting in the emergence of innovative new Internet and software dependent services.

Rising demand for wearables, smart devices and mobile solutions is also increasing the demand for specialized semiconductor components. The Semiconductor subsector had four Chinese IPOs which raised US$533mn compared to US$418mn in Q2’14, a 28% increase in proceeds quarter over quarter with the same number of deals. On a year-over-year basis, semiconductor deals increased 300% (one in Q3’13) and proceeds advanced 651% (US$71mn in Q3’13). All four semiconductor IPOs were Chinese companies, two listing on the Shanghai exchange and two listing on the Shenzhen exchange.

Sector distribution  

The geographic distribution of technology IPOs in Q3’14 was spread across six nations. China took the top spot with 10 deals (56%). Israel followed with three deals, the US posted two deals, and Australia, New Zealand and Luxembourg each had one deal. China also raised the highest proceeds at US$23.0bn (93%), followed by Israel with US$1.1bn (4%), and the US with US$524mn (2%).

In terms of Q3’14 average proceeds, China with US$2.3bn (skewed by Alibaba) was considerably higher than the US with average deal size of US$262mn. However, excluding Alibaba, average issue size was US$133mn in China. Israel raised US$350mn on average, followed by the remaining countries with one deal each raising an average of US$81mn in proceeds: Australia, New Zealand, and Luxembourg.

China
 

Raman Chitkara

Global leader
Technology
+1 (408) 817 3746

JianBin Gao

China and Hong Kong leader
Technology
+86 (21) 2323 3362

Jass Sarai

UK leader
Technology
+44 01895 52 2206

Alan Jones

US Technology Deals Partner
+1 (408) 667 0985

Pierre Marty

European Software Leader, PwC
+33 1 5657 58 15
 
   
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Analysis & opinions

Technology IPO market insights
“Record IPO proceeds in the third quarter reflect the continued economic recovery and underlying optimism prevailing around the world. While the final quarter of the year has started with rising market volatility, investor faith in the future of the technology sector remains strong, meeting and even exceeding historical norms.”

-- Raman Chitkara, Global Technology Industry Leader, PwC
Technology IPO market insights
"The successful Alibaba IPO breaks a number of historical records for technology companies in China making cross-border listings. Following this milestone, the pipeline for both domestic A share listings and cross-border listings is very strong. The China stock market is steadily processing the large volume of applicants in the pipeline. In addition, the potential amendment relaxing the profit requirement rule for internet/mobile internet companies could encourage even more technology companies to list on the Chinese exchanges in the medium term."

-- Jianbin Gao, Technology Industry Leader, PwC China
Technology IPO market insights
“In recent years, Israeli technology companies were staying away from the capital markets. The large majority of investors and companies chose instead to be acquired as the primary exit strategy. However, since the end of 2013, there have been 12 IPOs of Israeli technology companies in the US and UK mainly as a result of a combination of strong capital markets and the maturity of more Israeli technology companies, who have become global market leaders in their respective sectors and industries. The pipeline for Israeli tech IPOs remains strong and unless the overall market shifts, we expect a continued stream of such IPOs in the upcoming year.”

-- Rubi Suliman, Technology Industry Leader, PwC Israel
Technology IPO market insights
“While total proceeds increased, overall US technology IPO market volume decelerated during the third quarter of 2014. The traditional August market slowdown was the primary driver of the slowdown. We also observed several US private technology companies raising large late-stage financing transactions, further delaying their requirement to enter the public markets."

-- Alan Jones, Deals Partner, PwC US