It was not a good year, but a very bad year for private companies looking to make their debut on US and global stock exchanges.
As of December 14, 2022, there were just 1,333 IPOs globally, raising $179.5 billion.
“In an environment characterized by higher inflation and rising interest rates, investors have turned away from new public companies and turned to less risky asset classes,” said Paul Go, EY’s global head of IPOs, in a report published this week.
In America, IPO activity fell in 2022 to levels not seen since the 2008-2009 global financial crisis.
Just 130 IPOs raised $9 billion this year, a 13-year low by volume and a 20-year low by value, according to EY data. Those numbers also represented a year-over-year decrease of 76% and 95% in volume and revenue, respectively.
Still, global IPO activity was 16% higher than 2019, even if this year fell short of record levels. In 2021, more than 2,400 IPOs were completed, raising more than $450 billion.
“A record year for IPOs in 2021 gave way to increased volatility on rising geopolitical tensions, inflation and aggressive rate hikes,” Go said.
Public offerings, backed by financial sponsors such as private equity firms, also saw a sharp decline, with the number of deals falling 77% while revenue plummeted 93%.
Risk-off sentiment has also weighed on merger pipelines, as many specialty acquisition companies — or SPACs, which raise capital from investors hoping to later find an acquisition target — are nearing their two-year window to post-launch targets in 2020 Find .
Notable names to have halted their IPO plans this year include grocery delivery platform Instacart, which the New York Times reported earlier this year as having halted a planned IPO. Instacart declined to comment on its IPO.
The story goes on
As sentiment in speculative areas of the market turned down this year amid economic uncertainty and tight financial conditions, investors have largely shunned new listed companies.
“Many potential IPO companies will still wait and see for the right window,” EY said. “For now, investors will focus on a company’s fundamentals such as revenue growth, profitability and cash flows, rather than just growth projections.”
The slump in IPO interest also comes in a year that has seen demand for mergers and acquisitions wane, with transaction volume in the third quarter down 58% year over year, data from S&P Global Market Intelligence showed.
11/04/2021: Grocery delivery app Instacart logo displayed on a smartphone screen. (Photo illustration by Davide Bonaldo/SOPA Images/LightRocket via Getty Images)
Some bright spots remained in an ugly year for deal activity, as technology IPOs continued to lead by volume, accounting for nearly a quarter of deals. The energy sector led the way in revenue, which accounted for more than a fifth of the funds raised through IPOs in 2022.
Globally, the proceeds from mega IPOs or those exceeding $1 billion
EY said IPO activity is likely to improve in the new year as more favorable conditions settle in later in 2023, but the first quarter could be dismal before activity picks up steam again in the second half of the year.
“As the pipeline continues to grow, many companies are waiting for the right time to revive their IPO plans,” Go said in a note. “Nonetheless, with market liquidity tightening, investors are more risk-averse and prefer companies that can demonstrate robust business models in terms of profitability and cash flows, while clearly articulating their ESG agendas.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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