It’s shaping up to be a dismal year for initial public offerings on U.S. markets in 2022, with the number of IPOs plunging an estimated 78% from the year-ago quarter to a total of 90 — the majority of which were technology and health-care offerings. Further, proceeds raised via new issues plunged 94% to $8.6 billion.
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Technology and health-care offerings combined for 51 IPOs on U.S. exchanges that raised $4 billion, according to a report from Ernst & Young. Though the year has not yet ended, final calculations for 2022 were based on EY estimates.
For North and South America, the number of IPOs plunged 76% to 130, as proceeds collapsed 95% to $9 billion. Overall, IPO activity in the Americas hit a 13-year low by volume. Proceeds raised plunged to a 20-year low, EY said.
“There was a perfect storm of headwinds,” Rachel Gerring, EY Americas IPO Leader, told Investor’s Business Daily.
Those headwinds include rising inflation and interest rates, recession fears, a beaten down stock market, volatility stemming from Russia’s war with Ukraine, tensions with China and lingering pandemic disruptions. In addition, low corporate valuations discouraged companies from pursuing public listings.
Technology Firms Take Largest Share Of IPOs
Globally, technology companies have accounted for the largest share of IPOs this year, at 23%, or 310. That compares with 631 tech IPOs during 2021, or 26% of the total.
But worldwide tech IPOs in 2022 raked in only $35.2 billion, for 20% of the overall share, and fell to second behind the energy sector on that metric. Tech’s share of the proceeds for 2021 came in at $149.1 billion, nearly a third of the overall share at 32% and more than double that year’s second-place finisher, health and life sciences.
The IPO class of 2022 looks especially weak in that the comparisons are against a strong performance in 2021. The market for public offerings stalled in 2020 due to the Covid pandemic. That created an IPO backlog that was flushed out in 2021 with a flood of offerings due to pent-up demand.
The good news for companies awaiting offerings is that when stock markets heal and IPOs are once again open for business, there’s a backlog of potential blockbuster new issues waiting in the wings.
This includes rocket-ship maker SpaceX, food delivery company Instacart, finance company Stripe and TikTok owner ByteDance.
Gerring also said other factors expected to fuel a burst of IPO activity when the markets reopen pertain to venture capital and private equity firms. When stock markets tank, private equity and venture capital firms end up holding these private companies in their portfolio longer than expected, not wanting to push them out in a weak market, he said. When the stock market improves they’ll jump at the chance.
New Issues Dropped 45% Worldwide
Globally, there were 1,333 IPOs, down 45%. Proceeds dropped 61% to $179.5 billion, with most of that coming from IPOs in the Asia-Pacific region, including China.
According to the EY report, “Even though IPO activity will likely remain somber through at least the first quarter, favorable conditions seem to be set in place for the global IPO activities to regain greater momentum by the second half of the year.”
In addition, the report said: “Many prospective IPO companies are still going to take the ‘wait-and-see’ approach, holding out for the right window.”
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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Read More: IPOs In 2022 A Year To Forget As Numbers Fall Sharply