Initial public offerings in 2022 are heading for their longest drought since the global financial crisis — and bankers don’t expect a revival anytime soon.
Keypoints：
- 2022 IPO listings slump is the worst since IPO values tumbled 73% in 2008
- Why the IPO market plunged?
- Regarding the2023 IPO Market outlook
- 7 most anticipatesIPOs in 2023
1-2022 IPO listings slump is the worst since IPO values tumbled 73% in 2008
According to KPMG data, the global IPO market hit a record high in 2021, more than 1,000 companies went public in 2021. While 2022 sees less IPO activity on major global exchanges, the total funds raised fell by 60% globally, and the total IPO funds raised on the two major US stock exchanges fell by more than 90%. Even the number for special purpose acquisition companies, or SPACs, are worse, with plunging 86% from 2021.
New York’s initial public offerings raised just $24 billion in proceeds so far in 2022, putting it on pace for the worst performance since 1990, according to data compiled by Bloomberg. It’s a jarring 93% reversal from 2021's record of more than $338 billion as the broader equity market soared to all-time highs.The US IPO market has been one of the biggest drags, hit by a collapse in the blank-check deals that were behind 2021’s surge. On average, the crop of 2021 US market debutantes are down 19% since going public — among them once highly sought-after EV startup Rivian Automotive Inc, which is down almost 70%.
Equity listings on the Nasdaq fell about 80% in 2022, A total of 156 companies listed their shares on the bourse this year, raising nearly $15 billion in initial public offerings, a far cry from 743 firms that raised $180 billion in what was a blockbuster 2021, data from the exchange operator showed.
Cash calls from companies seeking to shore up their balance sheets have been an outlier, Almost $716 billion of rights issues were launched this year, just short of 2021’s record $759 billion.
2-Why the IPO market plunged?
There were a host of reasons for the plunge, such as the war in Ukraine, rising interest rates and inflation, and the uncertainty about economic growth. The result was that investors fled high-risk investments, which are common for IPOs.
The IPO market has gone "on almost a pause" as investors wait for clarity around the extent to which interest rates are going to rise. The U.S. central bank raised rates as expected in December, The Fed's policy-setting committee projected it would continue raising rates to above 5% in 2023, a level not seen since a steep economic downturn in 2007, quashing hopes that the central bank would hit the brakes on its hiking-cycle early next year.
The U.S. stock markets wobbled through much of 2022 due to a spate of selloffs as the Fed took an aggressive stance on interest rates.
Lynn Martin, president of Intercontinental Exchange Inc's New York Stock Exchange pointed:
"The reason companies aren't coming to market isn't because the public market currency isn't strong, In fact, our pipeline is tremendous. The reason these aren't coming to market is because of all the volatility in the market."
LSEG Group Chief Executive David Schwimmer,
"Volatility has been heightened since the beginning of the pandemic by a large increase in electronic trading driven by algorithms, which has led to faster and larger volume spikes than were seen even five years ago.
"What's more, two other factors had the biggest impact on the dropoff in IPOs this year: the change in the forward multiple of the S&P 500 — more so than the index’s absolute value — and the year-over-year change in the 10-year yield, according to a Wells Fargo analysis.Bankers believe more IPO activity will come when those two measures level out.
3-Regarding the 2023 IPO Market outlook
Undoubtedly, the appetite for new issues is likely to remain quite curbed with the Federal Reserve continuing to raise interest rates, tempering enthusiasm for hot growth companies lacking historical financial data. With a recession also on the horizon, 2023 doesn't seem like it'll be a great year for red-hot tech IPOs.
Gareth McCartney, global co-head of ECM at UBS:
“We expect to see a slow normalization of the IPO market next year. The US will likely be the first to recover and there are early signs of a rebound there with increased block-trade activity."
Nasdaq Inc CEO Adena Friedman said, The lull in the IPO market is expected to spill over into the first half of 2023 and would pick up in the second half of the year. There are about 200 companies currently waiting to go public on the Nasdaq, which is below the range of 250-300 over the past few years.
"We are hopeful that the second half of '23 becomes an opportunity for companies to get out, but I would expect a quiet first half."
More than 1,200 unicorns are waiting to enter the public markets. From GETTY IMAGES
John Kolz, US head of ECM and global co-head of ECM at RBC Capital Markets LLC shared:
"But for IPOs with the right story, there’s a massive amount of cash waiting to be deployed into a sizable backlog of financing plans. "
Ray Wang, founder and principal analyst at Constellation Research, told Yahoo Finance Live this week:
"There are a lot of IPOs on the horizon that you're going to see, I think people are waiting for the interest rates to stabilize. If the Fed can get to rate hikes of 0.25% in January, I think we might have some hope,".
4-7 most anticipates IPOs in 2023
It will be interesting to gauge the appetite for new issues as we move into the latter stages of this bear market.The most exciting upcoming IPOs for next year include a major chipmaker, a payments processor and etc.
Source: www.thestockdork.com
3.1 Payments giant Stripe
- Expected IPO timeline: Second quarter of 2023
- Estimated IPO valuation: $74 billion
Stripe is the biggest and, quite possibly, the most-anticipated IPO of 2023. The payment-processing giant is going into an environment that's been hostile to fintech firms. Going public in 2023 will entail a lower valuation of around $74 billion, down from $95 billion.
Indeed, the company slashed its internal valuation by 28%. The big cut could be deeper, though, if the tech sell-off drags into the new year and post-IPO.
3.2 One of the world's largest semiconductor companies Arm
- Expected IPO timeline: March 2023
- Estimated IPO valuation: $60 billion
Founded 30 years ago, Arm has shipped more than 230 billion chips across the world and its technologies impact about 70% of the world's population.In the latest quarter, Arm reported $656 million in revenues and shipped 7.5 billion chips, up 9% on a year-over-year basis. The adjusted EBITDA was $326 million.
In September 2020, rival chipmaker $NVIDIA Corp(NVDA)$ opens in new tab agreed to buy Arm from its owner, SoftBank Group, for $40 billion. However, the deal became subject to intense antitrust scrutiny, and the parties abandoned the proposed acquisition in early 2022.
3.3 Social-media company Reddit
- Expected IPO timeline: Mid of 2023
- Estimated IPO valuation: $15 billion
The meme stock boom may be over, but Reddit's IPO could reignite the hype of the "degens" subscribed to WallStreetBets.
Although social media stocks have been under considerable pressure lately, still, Reddit is arguably one of the most popular of the batch, with the number of posts continuing to grow by double-digit percentage points.
Reddit is a very different type of social-media play that can engage and educate better than some of its rivals. For that reason, Reddit seems to be one of the wider-moat offerings of the 2023 IPO slate.
3.4 Video-game-centered messaging firm Discord
- Expected IPO timeline:
- Estimated IPO valuation: $15 billion
Sticking with the social theme, Discord may make a splash on the public markets in the new year.The company seems to have less of a moat relative to Reddit. $Microsoft(MSFT)$ failed pursuit of Discord has the firm experimenting with Teams to take a bit of share away.
As Microsoft targets its own version of Discord (called Communities), we'll likely see fierce competition out of the gate when the Discord IPO goes live.
3.5 Travel booking startup TripActions
- Expected IPO timeline: Second quarter of 2023
- Estimated IPO valuation: $12 billion
Founded in 2015, TripActions operates a platform that provides travel and expense management for businesses. The company rolled out its global rapid reimbursements program,this allows employees to get reimbursed within 24 to 48 hours. The company has also been focused on acquisitions.Some of the deals include Resia and Comtravo – two European-based travel management companies. Then there was the purchase of Reed & Mackay, a provider of services for high-end business travel and events.
In October, TripActions announced a $304 million funding at a valuation of $9.2 billion, up two times since 2020.
3.6 Grocery pickup and delivery company Instacart
- Expected IPO timeline: Early 2023 IPO.
- Estimated IPO valuation: $13 billion
Headquartered in San Francisco, Instacart partners with more than 25,000 grocery stores and “big box” chains to hand-pick store items and deliver them to customers.Instacart filed confidentially for an IPO with the SEC on May 11th, 2022, suggesting a late 2022 or Early 2023 IPO.
However, October 2022 reporting by the New York Times revealed the company is scrapping its plans to go public in 2022, citing market volatility. This comes after the company cut its internal valuation down to $13 billion after peaking at $39 billion in 2021.
3.7 The logistics and supply chain services startup Flexport
- ExpectedIPO timeline: 2023
- EstimatedIPO valuation: $ 8 billion
Flexport the logistics and supply chain services startup is currently on the lookout to nearly double its team of engineers. Flexport helps simplify logistics by creating a network of shipping entities, sophisticated route planning and tracking, and paperwork automation.
In its last Series E round of funding, Flexport raised $935 mn at a valuation of $8 bn. Moreover, the company reported revenues of $3 bn in 2021 and is on track to cross $5 bn in 2022.However, many speculate that the company might finally bite the bullet in 2023 and come out with an offering.
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