Global Technology IPO Review Q2 2017 PwC | Global Technology IPO Review Q2 2017 1 Global tech IPO market has best quarter in two years based on volume: 28 IPOs Including four Unicorns In Q2 2017 Raman Chitkara Partner and Global Technology Industry Leader PricewaterhouseCoopers LLP raman.chitkara Welcome to the Q2 2017 issue of PwCs Global Technology IPO Review. It was the best quarter for technology initial public offerings (IPOs) in two years as the upbeat mood in the capital markets increased the appetite of investors for new public offerings. In the second quarter, 28 technology companies completed IPOs for total proceeds of US$5.1 billion. This is the most technology IPOs since Q2 2015 when there were 36. The improvement of economic fundamentals in the major developed economies, continued rallies in many equity markets and the backlog of tech companies waiting to go public led to the increased volume. While four Unicorns completed their IPOs, the big names continued to stay on the sidelines. The pace of Unicorn IPOs in the remainder of calendar 2017 is likely to be influenced by the post-IPO performance of Unicorns that completed their IPOs in the first half. Geographically, China continued to show robust growth in the technology IPO market with 16 companies raising a total of US$1.2 billion. Chinese IPOs were favorably impacted by the efforts of the China Securities Regulatory Commission (CSRC) to speed up the approval process. South Korea had a strong quarter with two IPOs, raising US$2.405 billion, including the largest IPO of Q2Netmarble Games Corp. with proceeds of US$2.356 billion. The US had six IPOs with total proceeds of less than a billion, a 50% improvement over the preceding quarter, though significantly below comparable historical levels achieved during strong IPO cycles. After a drought of five quarters, the UK had one technology IPO in Q2 2017, raising US$324 million. Rounding out Q2, Belgium, Canada and Israel had one IPO each. In a rare turn of events, Internet Software the tone, tenor and timing of US budget, debt ceiling and tax reform deliberations, and the continuity of overall global economic progress without inflationary pressures. Lastly, gaps between private company valuations in the recent past and the valuations investors are willing to give public companies will influence how many and which Unicorns test the capital markets in the second half of 2017. Sincerely, *Issue size greater than US$40 million (includes overallotment) and based on trade date; See Methodology PwC | Global Technology IPO Review Q2 2017 2 Table of contents 1. Q2 2017 Global tech IPO summary 3 Tech IPOs continue to ride high on positive investor sentiment 3 First-half 2017 average proceeds are higher than first-half 2015 and 2016 Led by six Unicorn listings 4 The Asian tech IPO market takes center stage this quarter 5 Tech IPOs in Q2 2017 have wider geographic spread than the previous quarter 6 Global macroeconomic conditions improve as Asia gains strength; political challenges continue in the US and Europe 7 Semiconductor surprise: Subsector shares top spot for number of IPOs with Internet Software the number of listings rose 56% quarter over quarter and 100% year over year. Proceeds declined 12% from the previous quarter, but increased 246% year over year. Chinese technology companies led with 16 IPOs raising US$1.2 billion. South Korea had two IPOs that raised more than US$2.4 billion. The US had six tech IPOs with total proceeds of US$764 million. Technology IPOs included four Unicorns, twice the number in Q1. All were in the Internet Software political challenges continue in the US and Europe Europe had two IPOs, one each from Belgium and the UK, together raising US$591 million in Q2 2017. Nonetheless, it continued to lag behind Asia and North America with the fallout from Brexit still putting a damper on enthusiasm. Asia was at full throttle with 19 IPOs raising US$3.7 billion. In North America, the US had six IPOs and Canada had one. The valuation gap is still a concern for technology companies in the US, with private placements valuing them at much higher multiples compared to their likely IPO valuations. Figure 5: Regional analysis of IPO proceeds Source: S the others were on the Chinese exchanges. The biggest IPO in China this quarter was Olympic Circuit Technology, which raised US$195 million. The increasing participation of companies from mainland China was due to the attraction of the relatively higher PE ratio for companies on Chinese exchanges compared to the US and European exchanges, and the acceleration of the IPO approval process by the regulatory authorities (CSRC). Figure 9: China tech IPOs Source: S earlier laws allowed only listings by companies with reported net income. However, the IPO market in H2 2017 may slow down somewhat as a result of certain companies postponing their IPO plans and any further escalating tension with North Korea could also curtail enthus