Balance for 2022 as a whole: the number of IPOs in 2022 falls by 45 percent compared to the record year 2021, volume by 61 percent / 50 percent fewer IPOs in the fourth quarter, issue volume shrinks by 73 percent.
These are the results of the current IPO barometer of the audit and consulting firm EY. Companies continued to hold back on IPOs towards the end of the year: a total of 334 companies worldwide took the plunge in the fourth quarter – 50 percent fewer than in the fourth quarter of the record year 2021. The issue volume fell by 73 percent to 31.9 billion US dollars.
The picture is similar for the year as a whole: the number of IPOs worldwide fell by 45 percent to 1,333, while the issuing volume shrank by 61 percent to 180 billion US dollars. Nevertheless, compared to the pre-pandemic year 2019, the number of IPOs rose by 16 percent this year.
Worldwide, the difficult environment caused a total of 278 companies to postpone or cancel already announced IPOs this year.
Strongest losses in US market
The strongest losses compared to the strong previous year were recorded this year by the US stock exchange, where the number of IPOs fell by 78 percent and the issue volume even plummeted by 94 percent. In Europe, a decline of 70 percent in the number and 78 percent in the value of IPOs was recorded. IPO activity was much more stable in China (including Hong Kong), where the number and total value of new issues each shrank by 22 percent. China’s market share of the global IPO market – in terms of global issuance volume – rose correspondingly sharply from 28 per cent in 2021 to 55 per cent in the current year.
After the record year of 2021, 2022 was characterised by geopolitical tensions, high inflation and sharp interest rate hikes, as well as correspondingly high volatility,” sums up Dr Martin Steinbach, Partner and Head of IPO and Listing Services at EY. “Many IPO candidates have postponed their IPOs for the time being – also because potential investors were much more reluctant than in the previous year in view of weaker stock markets, falling valuations and in many cases weak post-IPO performance.”
Even the end of the year did not bring a turnaround – on the contrary: the fourth quarter of 2022 was the weakest fourth quarter in more than 10 years, both in terms of numbers and proceeds.
Financial investors in particular have significantly reduced their exit activities. In 2022, the number of IPOs of companies from the portfolios of private equity funds fell to 65 – a 20-year low. In the previous year, 286 such transactions had been counted.
Companies are waiting for better conditions
“This year, the IPO pipeline has continued to build up,” says Steinbach. “Many companies are waiting for the right time to master the IPO with good preparation. However, with tighter market liquidity, investors are more selective and prefer companies with sustainable business models that can show good numbers in terms of profitability while clearly articulating their ESG agenda.”
Steinbach is cautiously optimistic for the coming year: “Recently, volatility on the global capital markets had decreased somewhat. In addition, there is a general expectation that the rise in interest rates will slow down in the course of 2023. This means that the coming year could offer more favourable conditions for IPOs, so that global IPO activity could pick up again, especially in the second half of 2023. An end to the war in Ukraine and geopolitical tensions would also have a positive impact on general market sentiment.
Steinbach advises, “Companies that have prepared well will benefit from the transaction flexibility they have achieved and can take advantage of IPO windows opening in the short term in 2023.”
End of the SPAC boom
The number of SPACs has continued to fall in the current year: After a total of 682 SPAC transactions were counted worldwide in the previous year, the number was only 155 in the current year – a decline of 77 percent. The global issue volume shrank by 90 percent from 172 billion US dollars last year to 16.5 billion US dollars in 2022.
Currently, around 480 SPACs are looking for target companies worldwide – 80 percent of them will expire by mid-2023. So they are under a lot of time pressure to invest the money they have raised. “For companies currently planning to go public, a merger with a shell company can be an interesting alternative route to the trading floor,” Steinbach emphasises.