- Total global IPO value set to rise 5% in 2018 boosted by late Tencent Music and SoftBank megadeals, despite global IPO volume down -17% 

- Cross-border capital raising hits four-year high, up 68% to $62 billion. 8 out of 10 of largest cross-border IPOs this year have involved Chinese issuers 

- Domestic capital raising declines by -11% globally and -21% by volume
The total value of initial public offerings (IPOs) has surged to a four-year high this year as global capital raising reaches $219.4 billion, inching up 5% according to new research from Baker McKenzie. 

High-value megadeals are compensating for a slower year in deal volume than 2017. Following 2017's ten-year high of 1,739 IPOs, 2018 has seen 1,448 deals; a drop of -17%. This fall is offset by a 5% increase in IPO value to $219.4 billion, boosted by Tencent Music's $1.2 billion New York listing and SoftBank's record $21.1 billion Tokyo listing, both expected later this month. 
Koen Vanhaerents, Baker McKenzie's Global Head of Capital Markets said: "It's been another year of strong geopolitical headwinds - protectionism, Brexit and general uncertainty caused by elections around the world - all of which have done little to dampen capital market activity amongst certain issuers. In particular, we've seen an increase in cross-border IPO value in 2018, largely as a result of an increase in listings and capital raising by Chinese companies tapping deep investor pools in Hong Kong and the US. While domestic listings were down slightly from where we expected them to be, we expect an uptick in 2019 as new governments settle and certainty increases once more."
Cross-border listing activity rebounds as Hong Kong and the US vie for listings. London / EMEA activity slumps 
Cross-border activity rebounded this year with capital raising reaching a four-year high to $62 billion, up 68% on last year. The volume of IPOs also increased by 19% to 221 listings. New listing regimes in Hong Kong which make it easier for companies to list, as well as the continued growth in Chinese-domiciled companies listing in the US has been behind much of the increase. 

In fact, of the 10 largest cross-border IPOs this year, eight have involved Chinese issuers with China Tower Corp Ltd's $6.9 billion Hong Kong Stock Exchange (HKSE) listing the largest. Chinese tech start-ups also continued to flock to the US for better fundraising options, with e-commerce company Pinduoduo raising over $1.6 billion in July with its Nasdaq listing.

Despite Brexit, London (mainboard and AIM) remains the most active destination for cross-border listings in Europe, the Middle East and Africa. However, the total volume of London cross-border listings declined by -35% to 15 listings - similar to the 9 listings we saw in 2016 when the Brexit referendum took place – amounting to $2.5 billion, a -71% decline on last year. 

Adam Farlow, Baker McKenzie's EMEA Head of Capital Markets said: "As the strength of the U.S. market continues to grow and Brexit continues to generate uncertainty for investors, we are seeing strong competition to the London Stock Exchange for cross-border listings. This uncertainty will carry over into next year as we reach the UK's EU departure date."

Subdued listing activity in London reflected a broader slump across Europe, the Middle East and Africa, with the region seeing a -45% drop in the total value of capital raised through IPOs to $6.1 billion, representing a 3% fall in the number of listings recorded to 30 (one down on last year). This lends support to the idea that issuers continue to look to alternative stock exchanges outside of London and even Europe as uncertainties around Brexit, Italy's debt issues and political concerns in both Italy and Germany spook issuers. 

Domestic listings decline globally
Underpinning the decline in IPO volume this year was a general fall in domestic listings globally. Overall, the volume of domestic IPOs was down -21% to 1,231 in 2018, equating to an -11% decline in capital raising, totalling $158.2 billion. This was largely as a result of market volatility caused by US political concerns, as well as recent and upcoming elections in the US, India and much of Latin America. 

Ongoing Brexit concerns saw London fail to make the top 10 exchanges for domestic listings by volume, with only 49 listings on the London Stock Exchange and AIM collectively. This is down -14% on last year by volume (57 IPOs in 2017) and -10% by value, amounting to $9.1 billion. This follows a similar pattern as in 2016 – the year of the Brexit referendum – when there were only 47 listings as investor confidence dropped. 
By contrast, despite a tumultuous year with mid-term elections and ongoing US-China trade tensions, the US was the most active nation for domestic IPOs with a total of 200 listings at a value of $41.7 billion. This represents an 18% increase in volume on last year and is 96% higher when compared with total domestic IPOs in 2016 when the US general elections were last held. Unsurprisingly, the Tokyo Stock Exchange is set to top the leader board for IPO value, up by an eye-watering 337% to $26.6 billion as a result of the imminent SoftBank listing (IPO volume increased by 9%). 
Chris Bartoli, Baker McKenzie's North America Head of Capital Markets said: "Tax reforms and regulation changes have provided a favourable environment for growth in North America capital markets activity for the second year running. Despite recent market disruption and volatility, given the effect of tax reform and an overall more favourable regulatory environment, we expect 2019 to be another strong year with anticipated listings that had deferred up to now, coming into play."

In Latin America, political uncertainty resulted in a significant drop in IPO value and volume as a number of countries held general elections. Across the region there were only 11 domestic IPOs totalling $8.9 billion; a decline of -39% in volume and -2% in value on last year. This includes three mega deals: Empresa Brasileira de Infraestrutura Aeroportuaria (Infraero), set to raise $3.6 billion; Grupo Aeroportuario de la Ciudad de Mexico, which raised $1.8 billion on the Mexican stock exchange in March; and Hapvida Participações e Investimentos, which raised $1.1 billion on Brazil's B3 in April. Unlike last year, there were no cross-border listings in the region in 2018. 

Pablo Berckholtz, Latin America Head of Capital Markets said: ""As expected, regional elections have impacted on activity - with at least 10 presidential elections or changes in government in 2018 alone, including in larger countries such as Colombia, Mexico, Chile and Brazil. While we can expect this to stretch for another 6-12 months, there are high expectations for the performance of Argentina in 2019, as its current economic reforms are introduced and settle."

Volume of Private Equity and Venture-Capital backed IPOs decline
In line with the overall market and a slower pace of exits with higher value pricing, Private Equity (PE) and Venture Capital (VC) backed IPOs suffered a decline in volume in 2018 down by -44%, but with capital raising slightly up by 2% to $72 billion from 2017's $70.9 billion. 

Within that, VC-backed capital raising fell -14%, a slide which was only partially negated by a 22% increase in PE-backed IPO value. Part of the malaise in the market is the fact PE funds are holding assets for longer and that capital has become patient given the wider choice of investment vehicles which have come to the market in the last few years. Both buyout funds and others have been holding funds for double the time than would have been traditionally witnessed. 

Commenting, Baker McKenzie's Global Head of Private Equity David Allen said: "There is plenty of capital being raised by buyout funds on the lookout for investment opportunities, providing cash for companies that would otherwise have listed. However, a stronger year is forecast in 2019 for exits with IPOs likely from both Dropbox and DocuSign."

Hong Kong: destination of choice
Hong Kong confirmed its position once again at the top of the leader board of stock exchanges with $36.6 billion worth of deals recorded, a jump of 124% on last year. New listing regimes in Hong Kong which now accept companies with weighted voting structures, for example, has been vital in helping to drive this surge in activity. It is also a popular destination amongst Chinese issuers seeking to leverage both foreign investment and less stringent regulations which would apply were they to list domestically. 

David Holland, Baker McKenzie's Asia Pacific Head of Capital Markets, said: "While interest and exchange rates continue to affect cross-border activity, the value of listings has shot up as a result of Chinese issuers seeking foreign investment and more flexible listing rules, particularly in Hong Kong."

Nasdaq stole Hong Kong’s crown as the most active exchange by volume with a total of 190 IPOs, up 44% on the year, boosted by the growing number of tech listings particularly from China. 

A busy year for Financials
Financials continues to be the most active sector in the global IPO market with 290 IPOs, up 18% on 2017. The value of these listings fell, however, by -24% to $41.7 billion. The majority of these listings were on domestic exchanges, for example AXA Equitable Holdings’ IPO in May which raised $3.2 billion on the New York Stock Exchange and DW Group’s $1.6 billion IPO in Frankfurt. 
The telecommunications sector had an extremely successful year for capital raising totalling $33.9 billion, up an incredible 2300% on 2017. This increase can be attributed to three megadeals: Softbank's $21.1 billion listing due to list on Tokyo's exchange on 19 December; China Tower's $6.9 billion HKSE listing; and Xiaomi's $5.4 billion HKSE listing. Total capital was raised by only 18 issues in the sector, compared to the 290 listings in Financials.

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