Dive Brief:

• The U.S. market for Initial Public Offerings (IPOs) surged in 2021 more than at any time in 21 years, with 75% of issuers achieving or exceeding their targeted price ranges, EY said.
• Issuers raised $155.7 billion in 416 deals during 2021, EY said, noting that the IPOs generated returns exceeding 20% one month after pricing but “declined considerably through year-end.”
• “Technology and health care IPOs are expected to continue their dominance,” EY said, adding that in 2022 “the potential for more activity in other sectors — such as consumer, retail and financials — will be impacted by the uncertain macro backdrop as we face new COVID-19 variants and rising inflation and interest rates.”

Dive Insight:

CFOs who completed IPOs in 2021 rode several tailwinds, including fiscal stimulus, record-low interest rates, high stock valuations, abundant capital and the global rebound from the pandemic-induced recession.

During the fourth quarter, however, “the winds shifted with the surfacing of the COVID-19 variant, continuing geopolitical tensions, slowing IPO activity and increased market volatility,” EY Global IPO Leader Paul Go said.

Companies that seek capital through IPOs in 2022 “will need to satisfy investor demands for resilient growth strategies and well-articulated environmental, social and governance (ESG) plans,” he said.

The global IPO market broke records in both volume and value, with 2,388 deals raising $453.3 billion, a 64% and 67% increase, respectively, compared with 2020, EY said, citing data on completed and expected IPOs as of Dec. 9, 2021.

In the U.S., the number of special purpose acquisition company (SPAC) IPOs exceeded traditional IPOs in 2021 and accounted for 90% of the transactions and 95% of the proceeds of SPACs worldwide, EY said.

After an initial burst at the start of 2021, SPAC IPOs in the U.S. declined in the face of “market and regulatory headwinds,” EY Americas SPAC Leader Karim Anani said.

Securities and Exchange Commission Chair Gary Gensler prompted concerns about SPACs in May when he flagged risks to investors and said the agency will investigate how the shell companies raise cash from the public and merge with target companies.

“I believe the investing public may not be getting like protections between traditional IPOs and SPACs,” Gensler said in a Dec. 9 speech, noting a need for more disclosures to investors and protections against fraud and conflicts of interest.

The SPAC market will likely remain an appealing alternative to traditional IPOs in 2022, Anani said. “Looking forward, we believe that target companies will benefit from the more than 600 SPACs that are actively seeking merger partners.”