IPOs of companies around the world in 2021 raised a historic total of $ 594 billion, riding the wave of euphoric bull markets, although their subsequent stock performance often disappointed investors.
From tech start-ups to “blank check” or special purpose purchasing (SPAC) companies flooded the market with stock offerings, taking advantage of investors’ willingness to make speculative bets as low interest rates and the reopening of economies with Covid-19 vaccines fueled their appetite for risk.
In Mexico the story is different, new companies have not reached the stock market in four years. 145 companies are registered in the Mexican Stock Exchange and six of them carry out the procedures to delist themselves from the Mexican stock market.
“It has been a truly euphoric capital market when viewed in the context of new issuance activity and, in particular, the creation of new listed companies,” said Andrew Wetenhall, Co-Head of Equity Capital Markets for the Americas. from Morgan Stanley. Some of those bets worked.
Those that went to the $ 1.2 billion IPO of PayPal Holdings Inc-backed loan company Affirm Holdings Inc in January have more than doubled their investment, compared with a 25% return on the S&P 500 index. But many other cases have soured after debut.
Shares of Swedish vegan milk maker Oatly Group AB, which raised $ 1.4 billion in its New York IPO in May, are down 53%, while those of British food delivery company Deliveroo Plc, which grossed 1.5 billion pounds ($ 2.1 billion) at its London premiere in March, they are down 46 percent.
The Renaissance IPO Index, which tracks the average performance of new US IPOs, is down about 8% for the year, compared with a 25% rise for the S&P 500 Index.
Some bankers warned that the shares of some of the companies that went public in 2021 continue to trade at historically high valuations, even if they took a hit after going public. This is because many investors were willing to pay a lot for these companies in private fundraising rounds in the lead up to their stock market debuts.
“The problem is that the buyers of these IPOs, as well as those who bought shares after the initial listing, are seeing losses,” said Paul Abrahimzadeh, co-head of capital markets for North America at Citigroup.
A total of 2,097 IPOs, excluding those of SPACs, raised $ 402 billion in 2021 worldwide, according to data provider Refinitiv. This represented an 81% increase in collection and a 51% increase in the number of IPOs in 2020.
Including SPACs, which are a kind of “shell” of companies that normally start their activity when they have found investors, the income from the IPO in 2021 reached 594,000 million dollars, according to the data provider Dealogic.
The main sectors that drove the large volumes of stock market debuts were technology and healthcare. This year 426 technology companies and 332 related to the health sector went public, which together represent almost 42% of total income from IPOs worldwide during the year, according to Refinitiv.
Among the biggest outflows of 2021 is that of electric vehicle maker Rivian Automotive, which raised more than $ 12 billion in its market debut in November, making it the biggest debut on U.S. stock markets since Alibaba Group Holding’s in November. 2014.
Other major IPOs included Chinese online video company Kuaishou Technology, which raised $ 5.4 billion, and Korean e-commerce giant Coupang, which raised $ 4.6 billion.
“It has been an extraordinary year for capital raising around the world, and I daresay it is unlikely to be repeated any time soon,” said James Fleming, Citigroup Co-Head of Global Capital Markets.
Setback in SPACS
The SPACs, which went public in New York, raised a total of about $ 160 billion this year, which is 28% of total revenue from U.S. IPOs, according to Refinitiv.
These “blank check” companies went up like a roller coaster, as investor enthusiasm for them earlier in the year later turned to disappointment at poor profitability.
SPAC’s main exchange-traded fund (or EFT), Defiance Next Gen SPAC Derived, has lost 25% of its value so far this year, after peaking in February.
“The peak rate of activity (for SPACs) was never sustainable and now the market is consolidating. But SPACs are not going to go away,” said Eddie Molloy, co-director of capital markets Americas at Morgan Stanley.
The list of IPOs for the first quarter of 2022 is strong, with social media platform Reddit, transportation technology start-up Via, software maker Cohesity, and private equity firm TPG having submitted to regulators the documentation necessary to quote. Investment bankers say the recent lukewarm financial performance from many IPOs means this year’s bonanza is unlikely to repeat itself in 2022, especially if equity markets lose some steam due to inflation and other concerns. of an economic nature.
There is also a regulatory risk. The US Securities and Exchange Commission took action against the listing of Chinese companies in New York, demanding more information. Trucking giant Didi Global Inc, which completed its $ 4.4 billion IPO in New York in June, will be listed in Hong Kong, due to pressure from China on many of its companies to move home.