Following a record-breaking 2021, the global IPO market slumped dramatically last year and several obstacles stand in the way of a rebound, according to research from professional services firm EY.
In 2022, the number of IPOs around the world fell by 45 percent to 1,333, while IPO proceeds dropped 61 percent to $175.9 bn, finds EY in its end-of-year report. The collapse in listings activity was particularly brutal in the Americas region, with volumes falling 76 percent and value 95 percent.
Amid a torrid year for stock market listings, Asia-Pacific stood out as a bright note: the region delivered 63 percent of deal volume and 67 percent of proceeds globally, notes EY. Year on year, Asia-Pacific also saw a more modest decline than other parts of the world.
On a sector basis, technology stocks provided the most IPOs in 2022, accounting for 23 percent of new listings. In a year when oil and gas stocks made a comeback, the energy sector came first by value with 22 percent of all IPO proceeds.
Investor sentiment knocked
‘A record year for IPOs in 2021 gave way to increasing volatility from rising geopolitical tensions, inflation and aggressive interest rate hikes,’ says Paul Go, EY global IPO leader, in a statement. ‘Weakened stock markets, valuations and post-IPO performance have further deterred IPO investor sentiment.’
Private companies hoping for a swift rebound in IPO activity look set to be disappointed, although there is hope conditions will ease during 2023.
EY points to several factors required for a meaningful increase in new listings: an uptick in stock market performance, falling inflation, peak interest rates, lower geopolitical tension and lessening impacts from Covid outbreaks.
‘Many prospective IPO companies are still going to take the wait-and-see approach, holding out for the right window,’ write the report authors. ‘For now, investors will focus on a company’s fundamentals, such as revenue growth, profitability and cash flows, over just growth projections.’