Companies last year defied the coronavirus pandemic to go public at a record pace. Now, market volatility, inflation and fears of a downturn have brought an abrupt end to the listing party.
Companies have raised a combined $4.9 billion via US initial public offerings this year, less than 6% of the record sum raised in the first half of 2021, according to data compiled by Bloomberg, While 2021’s volume was an historical outlier, this year’s paltry total distantly trails the $47 billion five-year average for the period.
Dealmakers said the IPO drought is unlikely to let up this summer and could even drag through the rest of the year if the economic outlook doesn’t perk up.
“All these indicators that investors are very focused on will require positive momentum before we can expect an improvement in capital markets activity,” said Alaoui Zenere, JPMorgan Chase & Co.’s co-head of equity capital markets for financial institutions and financial technology, referring to data points such as the consumer price index or the Cboe Volatility Index, or VIX.
“If the market stabilizes for a sustained amount of time, we could see a decent amount of supply,” she said. “But if the market continues to remain volatile, companies are going to take a prudent approach in accessing capital markets.”
Steeper Plunge
While IPOs have fallen from last year’s record around the world, the US plunge is far steeper. US volume is down 95% from this point last year, compared with only a 41% drop elsewhere, the data show.
So far in 2022, only two IPOs on US exchanges have raised more than $500 million. Alternative asset manager TPG Inc. raised $1.1 billion in January, while Bausch + Lomb Co., an eye-care spinoff from the health-care giant, got $630 million in May. TPG’s shares are down 13% through Monday’s close, outperforming the S&P 500’s 18% drop this year. Bausch + Lomb has fallen 13% in its first month and a half as a public company.
The waning fortunes of those and other recently listed companies could be giving IPO hopefuls pause.
Coinbase Global Inc. has announced a hiring freeze and rescinded offers to some job candidates after its stock lost more than three-quarters of its value this year. Electric-vehicle maker Rivian Automotive Inc. -- after raising almost $14 billion in the world’s 13th-biggest-ever IPO last year -- has struggled with supply shortages and manufacturing glitches, sending its shares down 73% since Jan. 1.
Trading losses
Not including blank-check firms that further elevated 2021’s record IPO totals, companies that went public in the US last year have sunk 44% on a weighted average basis since listing, according to data compiled by Bloomberg. Only about a 10th of those more than 500 companies are trading above their offer prices, the data shows.