This year's listing slump is the worst since a 73% drop in IPO values in 2008, according to Bloomberg data.
Initial public offerings are heading for their longest drought since the global financial crisis—and bankers don't expect a revival anytime soon.
A mix of rising inflation and interest rate hikes aimed at controlling it has hurt stock market valuations and reduced investor appetite for high-growth IPO candidates in recent years. Only $207 billion has been raised from listings this year – down 68% from last year – as the flotation boom in China and the Middle East failed to make up for the frozen US market.
Edward Byun, co-head of Asia's ex-Japan equity capital markets at Goldman Sachs Group Inc., said: "Resuming ECM activity requires two things: stability around inflation and a trajectory for rising interest rates." but visibility." With the firm belief that inflation has peaked and clarity on the rate outlook - likely in the second quarter of next year - we will start to see the market move forward."
This year's listing slump is the worst since a 73% drop in IPO values in 2008, according to Bloomberg data. It follows the boom of 2021, when a rally in stock markets and a US blank-check listing craze led to a $655 billion IPO. Since then, however, high-growth tech companies that don't have a path to profitability have lost favor, while consumer firms are finding a lack of investor support as inflation rises.
It doesn't help that so many of last year's IPO stars are underwater. On average, the 2021 crop of US market debutants is down 19% since going public -- among them once highly sought-after EV startup Rivian Automotive Inc., which is down nearly 70%.
America dries up
The US IPO market has been one of the biggest drags, hit by a decline in blank-check deals that were behind the 2021 boom. Listing volumes of $24 billion are the lowest since 1990 and are down 93% for 2021, bankers say, adding that investors will favor floatation of stable companies next year.
Bankers say the two markets that did well in 2022 - China and the Middle East - are likely to continue to do so, even as the Asian nation sees a rise in infections as it eases its Covid restrictions and increases oil prices. Prices are coming down. Stock market of Gulf countries.
Mandy Zhu, China Head of Global Banking at UBS Group AG said, “Given that the Chinese government is loosening regulations on the property sector and we are seeing a clear trend of easing Covid constraints, we expect the market to return. are expecting." Already seeing an increase in activity for both the onshore and offshore markets."
Companies in mainland China defied the ongoing asset crisis and the country's Covid-zero stance, raising a record $92 billion from IPOs this year, while companies in the Middle East garnered nearly $23 billion.
Cash calls from companies seeking to shore up their balance sheets in an otherwise gloomy year globally have been an outlier for equity capital markets bankers as loans become more expensive and economies slow. About $716 billion worth of rights issues were launched this year, just short of 2021's record $759 billion.
looking ahead
Still, with the Fed dashing expectations this week tilting dovish, few expect a quick IPO revival.
“We expect a slow normalization of the IPO market next year. Gareth McCartney, global co-head of ECM at UBS, said there is as yet no clear path to crisis or growth issuance, and investor demand in each product will be selective.
The US will probably be the first to recover and there are early signs of a rebound with an increase in block-trade activity, he added. Among the IPOs investors are watching for this year: Fortnite owner Epic Games Inc., delivery giant Instacart Inc., and sports apparel retailer Fanatics Inc.
Powell holds the key to reopening the US IPO window in 2023
UBS's McCartney said Europe would follow after that, although Asia's recovery would depend on China's reopening rather than the direction of inflation.
“We expect listings next year to come in dribs and drabs, as early as the first quarter, but the IPO market will only be open to certain sectors,” said Andreas Bernstorff, head of equity capital markets at BNP Paribas SA. "The cyclical and value sectors are likely to be in demand, with energy transition and climate tech companies attracting particularly strong demand."
China is expected to see a number of deals next year, while in the Middle East, Abu Dhabi National Oil Company has chosen banks to lead the IPO of its natural gas business next year, in what could be one of the city's biggest floatations. Could And in London, bankers and regulators are pushing hard to keep homegrown tech companies local, especially as SoftBank Group Corp.
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