IPOs worldwide plunged 46% during first half 2022: EY

Dive Brief:

Initial public offerings (IPOs) worldwide fell 46% during the first half of 2022 compared with the same period last year, with the number of technology companies going public plunging 61%, Ernst & Young said.
IPOs in the U.S. and other parts of the Americas plummeted 73% to just 77 during the period, generating proceeds of only $5 billion, or 95% less than the first six months of 2021, according to EY.
“With tightening market liquidity, investors have become more selective and are refocusing on companies that demonstrate resilient business models and profitable growth, while embedding ESG [environment, social and governance] as part of their core business values,” EY Global IPO Leader Paul Go said.

Dive Insight:

Many CFOs have postponed IPOs this year in the face of some of the harshest economic conditions in decades.

Financial markets reeled during the first half of 2022 amid flare ups of COVID-19, supply chain disruptions, the surge of inflation in the U.S. to a 40-year high, sanctions following Russia’s invasion of Ukraine and the abrupt pullback of stimulus by several central banks including the Federal Reserve.

Such “headwinds have led to a ‘wait-and-see’ approach,” according to Rachel Gerring, IPO leader for EY Americas.

Most IPOs completed in the U.S. in 2021 — a record year — are trading below their initial price and have fallen more than the broader equity market, EY said. “This has influenced investor appetite to participate in new transactions.”

Investors have become more selective when vetting IPO prospects, shrugging off growth stories and projections and focusing more on fundamentals, EY said.

CFOs during the first half of 2022 shelved plans for several “mega IPOs,” which aim to raise more than $1 billion in equity markets, EY said. “This represents a healthy pipeline of companies that will be prepared to come to market when the windows open.”

IPOs in the technology sector, while depressed compared with last year, will probably continue to elicit the highest number of deals in coming months, EY said. Technology companies from January through June raised $137 million on average through an IPO compared with $293 million during the first half of 2021.

The energy sector in coming months will likely lead in raising investor dollars as high oil prices prompt attention on renewable energy sources, EY said.

IPOs involving special purpose acquisition companies (SPACs) nosedived 75% during the first half of 2022 and raised only $14.5 billion, or 87% less than the same period last year. The SEC is considering cracking down on the so-called blank-check companies.

“A record number of existing SPACs are actively seeking targets, with the majority of them facing potential expiration in the next year,” EY said.

EY analysis reflects data on IPOs completed as of June 21 and expected IPOs during the final days of June.