The global IPO market continues to struggle with the upheaval in the banking sector.
That’s according to data released by Bloomberg News on Sunday (March 26) that showed companies raised $19.7 billion through initial public offerings (IPOs), down 70% year-on-year and the lowest comparable level since 2019 corresponds.
The largest drop occurred in the US, where companies have raised just $3.2 billion. According to the report, problems in the banking sector have created uncertainty around interest rates.
“Interest rates are the most important issue and there is a clear debate about how long the tightening will last or change direction and at what speed,” Udhay Furtado, co-head of ECM, Asia Pacific at Citigroup, told Bloomberg.
“There are a number of things that people need to look at, including the central bank’s direction, to determine whether it’s Q2, Q3 or Q4,” he said, referring to when IPO activity is picking up steam could. “As of this writing, it looks like it will be reversed.”
Meanwhile, companies that have already gone public are also struggling, according to PYMNTS’ FinTech US IPO Index, which tracks fintechs’ percentage returns since going public.
As noted here last week, the index has posted a 51% loss over the past year, which roughly compares to the Global X FinTech ETF’s 52% decline, with IPO funding falling 68% over the same period.
“Of course, now that the SVB crisis and general banks’ nervousness are becoming more risk-averse as a result, it may become even more difficult for FinTechs to obtain funding,” PYMNTS wrote.
Investor concern after the SVB is already emerging as fintechs that have gone public since 2020 are now trading at 54% below the asking price.
Credit platforms have particularly fueled this latest defeat, sending the IPO index down almost 5% this month. But FinTechs, which are focused on other struggling industries, are also facing problems, as mortgage brokerage platform Blend recently announced that its shares have fallen 40% in the past five sessions.
“Under the regulatory requirements of an IPO, which include SEC scrutiny, disclosures and financial reviews, FinTechs going public now must re-evaluate their winning strategies to appeal to the post-SVB investor,” PYMNTS wrote.
With revenue prioritizing potential growth, FinTechs looking for new funding may need to transition to a more stable, sustainable model, which may be more difficult than in years past as inflation and rising interest rates put additional pressure on profitability.
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