Under Water
The biggest IPOs that had been announced by this time in 2021 came from technology, online services and e-commerce sectors, including TikTok rival Kuaishou Technology in Hong Kong, Polish parcel-locker provider InPost SA and U.S. dating app Bumble Inc.
These companies saw surging demand during lockdowns, but initial gains quickly fizzled as economies reopened. Nine out of last year’s top 10 biggest IPOs are now under water, with ride-hailing company DiDi Global Inc.’s 73% drop since its listing leading the pack. Electric truckmaker Rivian Automotive Inc. has had a dizzying ride, falling 67% from its peak a week after selling shares in November.
And one year after Robinhood Markets Inc. found itself at the center of the meme-stock tempest, the retail brokerage is down 85% from last year’s high, and reported revenue and first-quarter outlook that missed estimates. The company is one of the worst high-profile global stock market debuts since the onset of the pandemic, joining the likes of Didi and London’s THG Plc.
With stock markets surging to fresh record highs in 2021, IPO valuations were particularly frothy. But poor post-listing performances and several high-profile flops have made investors more selective.
“Overall, it seems like the market and the appetite will be more muted than it was last year,” said Chi Chan, portfolio manager at Federated Hermes. “The question is, will the market be willing to digest the number of deals at the valuations that they want?”
Pockets of Activity
Still, some markets seem to have escaped the turmoil. South Korea’s LG Energy Solution raised $10.7 billion this month in the country’s biggest-ever IPO and went on to soar almost 70% in its Thursday debut. India is also gearing up for a record listing: State-owned insurer Life Insurance Corp. of India is expected to go public soon in a deal that could value it at as much as $203 billion, Bloomberg News reported.
And IPO markets could bounce back quickly if market swings die down. After a record spike in the VIX Index in March 2020, new deals started coming back just two months later. If listing candidates are mindful of investor caution on pricing, 2022 could turn its rough start around.
“In general, most companies are still moving forward with their IPO plans and could find a window to launch,” said Shi Qi, head of ECM at China International Capital Corp. “As long as the valuation expectation of the issuer is in line with market conditions, I think there is still demand for IPOs.”
—With assistance from Filipe Pacheco, Drew Singer and Benedikt Kammel.
This article was provided by Bloomberg News.