Home 2022 Global IPO market continues to plummet

Global IPO market continues to plummet

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Global IPO market continues to plummet
Global IPO market continues to plummet
  • Global IPO volumes fell 44%, with proceeds down by 57% nine-month YOY
  • US market is set to record its lowest IPO proceeds since 2003
  • Highest volume of IPOs is in technology and energy sector now leading on proceeds

Year-to-date (YTD) 2022, there have been a total of 992 IPOs raising US$146b, a 44% and 57% decrease year-over-year (YOY), respectively. This follows the trend for the year in which IPO companies and investors were faced with mounting macroeconomic challenges, market uncertainties, increasing volatility and falling global equity prices. Volatility (CBOE VIX average) increased from 19.7 in 2021 to 25.6 in YTD 2022.

YTD, the technology sector continued to lead by number of IPOs, although the average deal size came down from US$261m to US$123m YOY. While the energy sector overtook by proceeds with the largest increase of 176%, driven largely by three of the global top five deals in YTD 2022, the consumer products sector witnessed the biggest drop in average deal size (69%).

Q3 2022 saw the lowest SPAC IPO proceeds since Q3 2016, along with de-SPACs struggling to find the right targets. The SPAC market was continually challenged this quarter with only 17 deals, raising US$0.9b. A record number of existing SPACs are actively seeking targets, with the majority facing potential expiration in the next year. These and other findings were published today by EY.

Overall regional performance: taking a wait-and-see approach

Major economies and financial markets in the Americas and EMEIA remain under pressure as quantitative tightening kicks into a higher gear.

Americas exchanges saw the sharpest decline, recording only 116 deals raising US$7.5b YTD, a decrease of 94% in proceeds and 72% in volume YOY. In direct contrast to a record-breaking year in 2021, YTD Americas IPO activity sank to its lowest level in 20 years.

YOY, EMEIA IPO activity fell by 50% and 52% by number and proceeds, respectively. Europe dropped 76% in proceeds, but the Middle East continued to be a rare bright spot with a 209% increase in proceeds, despite a 51% decrease in the number of deals.

As the region has been less impacted by inflation and geopolitical issues, Asia-Pacific exchanges have performed relatively better, housing five of the top 10 global IPOs in YTD. YTD it has also contributed 61% and 69% of the global share of IPOs and proceeds, respectively. However, it still registered YOY declines of 25% by deal number and 22% by deal size.

Paul Go, EY Global IPO Leader, says:

“With uncertainties being the IPO market’s biggest challenge, companies and investors continue to wait for a more stable and positive stock market sentiment before any sustained appetite for IPO activity re-emerges.”

Q4 2022 outlook: icebreakers will pave the way

Soaring inflation and rising interest rates are adversely affecting the global equity market. Geopolitical tensions and the COVID-19 pandemic led to more market uncertainty and volatility. All these factors are bringing headwinds for risk assets as we near the end of 2022.

In the Americas, IPO pipelines are waiting for the market to reopen next year, and in EMEIA, tough market conditions continue to squeeze IPO windows. For APAC, while public filings for IPOs have not picked up, activity remains strong in the background as companies evaluate their options for 2023.

Go says: “Many companies’ IPO plans were put on ice in early 2022, in anticipation of more favorable market conditions. Providing market uncertainties and volatility subside, the launch of long-awaited blockbuster IPOs together with improved after-market returns may reverse the sentiment and attract more companies to follow.”

Overall, IPO candidates looking to go public will need to be well prepared when re-engaging the market as they will face much lower valuations compared with the highs of 2021.

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.