In 2019, the growth equity firm Asia Partners made several forecasts in its Internet Report regarding the state of affairs in the Association of Southeast Asian Nations (ASEAN) in a decade's time. The report anticipated that more tech companies would attain unicorn status and that some would pursue Initial Public Offerings (IPOs) over the following ten years. The recent Asia Partners Report on IPOs in 2023 has determined that most of these predictions have materialized. Southeast Asia has either exceeded expectations in terms of the remaining forecasts or is ahead of schedule, despite the 52% reduction in IPO fundraising compared to the previous year. As per the most recent report, there have been seven new tech IPOs in Southeast Asia since 2019. Additionally, there is a strong belief that the region will surpass its tech IPO targets by the year 2029.

Contrasting the 2019 forecasts with the 2023 observations

In 2019, Asia Partners expressed confidence that the ASEAN region was heading towards a prosperous future over the next decade. This venture firm, dedicated to investing in technology companies that could contribute to Southeast Asia's economy, observed a shift towards a "golden age of rising affluence" in the region. They drew parallels to the transformation seen in countries like China and South Korea when large tech companies emerged.

The 2019 report foresaw increasing opportunities, rising equity values, and a conducive investment environment for growth equity, particularly for boosting Series C and D funding rounds.

Another prediction was that more individuals who had worked at early tech companies would go on to establish the next generation of startups. At that time, there were 28,000 tech company alumni, with 1,200 of them venturing into entrepreneurship.

Lastly, Asia Partners anticipated that Southeast Asia would have more than 20 tech unicorns by 2029, with at least half of them considering IPOs within the next ten years.

As of the 2023 Internet Report, most of the 2019 predictions have been realized, although some are still pending. Since 2019, seven IPO deals have occurred, indicating progress towards the goal of 10+ deals by 2029. However, ASEAN has achieved only 15% of the target of new and established tech companies collectively raising $400 billion in equity value by 2029.

By 2021, it became evident that public equity markets were experiencing overvaluation. Global Market Capitalization (GMC), global nominal GDP (gross domestic product), and the GMC-to-nominal GDP ratio were on an upward trend. Occasionally, these figures dipped below the growth rate. Now, with the global economy facing the challenges of a recession, more significant issues are likely to arise.

Challenges faced in Southeast Asia on IPOs

While there are several positive developments in ASEAN's markets, there are still significant challenges stemming from global economic issues. Over the past few months, the US Federal Reserve has raised interest rates, causing disruption in the global economy. Many currencies have depreciated, and countries are grappling with inflationary concerns.

Additionally, the lingering effects of COVID-19 persist, with international borders yet to fully reopen for trade. Many countries have experienced declines in imports and exports as a consequence. The Russia-Ukraine conflict has disrupted supply chains, rendering them unreliable, risky, and expensive.

Asia Partners holds the view that the world is heading towards a global economic downturn. Despite assurances from global leaders, particularly in developed nations, that a recession is unlikely, Asia Partners' research suggests otherwise. They use indicators such as the US ten-year treasury yield compared to the two-year yield to predict forthcoming economic conditions. Furthermore, Asia Partners believes that US recessions have a correlated impact on the global economy. Consequently, they anticipate a recession that will affect individuals, businesses, and stock markets in Southeast Asia and around the world.

Although there may be a reduction in available capital due to the impact of the recession on investors, this does not imply that companies cannot generate value. Through sound corporate governance, effective fund management, innovation, and excellent customer service, startups can navigate these challenging times. Once they emerge from this period, they can position themselves in the markets and pursue an Initial Public Offering (IPO).

Prospects for upcoming technology IPOs

As per the e-Conomy SEA 2022 report, investors have a positive outlook on the future of Southeast Asia. It is anticipated that there will be an increase in deal activity between 2025 and 2030, with a particular emphasis on companies that have integrated environmental, social, and governance (ESG) principles into their policies.

The Asia Partners' IPO report provides insights into both the achievements and obstacles that the region may encounter in the long run. Nevertheless, the IPO trends currently observed in Southeast Asia suggest that ASEAN is well-positioned for success by 2029.

Source: https://techcollectivesea.com/2023/03/10/ipo-trends-southeast-asia-report/ 

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