The volatility due to the war between Russia and Ukraine, as well as the low valuations in the world’s stock markets, slowed down the global Initial Public Offerings (IPO) in the first quarter of 2022, being even the slowest first quarter since the 2019, since a 37% drop was reported in the number of companies reaching the Stock Exchange and 51% less in terms of collection.
Between January and March of this year, only 321 IPOs were registered in the world, for 54.4 billion dollars compared to 512 for 112 billion dollars in the same period of 2021, according to data from the market information platform, Dealogic, and the consulting firm EY.
Paul Go, Global IPO Leader at EY, believes that various aspects caused the slowdown and, in other cases, issuers chose to postpone their exit plans, after all of 2021 global IPOs closed at record highs, with 2,388 placements for 453,300 million dollars.
According to EY, while the first quarter of 2022 continued with the closing inertia of 2021 in terms of IPOs, the second half of the quarter showed a drop in world stock markets, mainly after the outbreak of the war after the invasion of Russia to Ukraine.
“Russia’s attack on Ukraine worsened conditions in the IPO market. Worry about what will happen has heightened volatility that makes it much more difficult to price IPOs,” said Matt Kennedy, senior IPO strategist at Renaissance Capital.
“The situation in Ukraine has further destabilized stock prices, while sending energy commodity prices skyrocketing. The volatility and uncertainty creates an unwelcoming environment for IPOs, which will continue to weigh heavily until a resolution is reached,” said international law firm Lexology.
will keep slowing down
“While markets continue to be volatile and uncertainty about the economic recovery persists for reasons including continued concern around Covid-19, there is a risk that IPO activity will continue to slow further with candidates choosing to postpone. their transactions,” said Paul Go.
One of the companies that has already announced that it could stop its plan to take its Porsche subsidiary to the stock market, at least for the time being, is the German Volkswagen.
Other companies that decided to wait for better market conditions for their debut on the stock market are the American yogurt manufacturer, Chobani; Kredivo’s parent company, FinAccel, as well as Efima Oy, a Finland-based company that offers cloud services.
In the document, Paul said that the contraction in IPOs was not unexpected compared to the first quarter of 2021, since that period last year was the busiest in the last 21 years.
However, the market impact of geopolitical tensions and other economic concerns in the second half of the quarter generated volatility and impacted capital markets.
“Companies must be prepared to enter the market when the window opens and include careful review of business models and preparation of alternative fundraising plans. They will need to meet investor demands for well-articulated environmental, social and corporate governance (ESG) action plans,” added the EY specialist.
By region, in America 37 IPOs were registered for 2.4 billion dollars, this is a 72% drop in the number of operations and a 95% drop in capital raising compared to the same period in 2021.
Mexico added another quarter without an IPO since the last third of 2020, although a new share issue is expected on the way. The Brazilian market also stopped.
“The volatility in the Brazilian market with elevated inflation and interest rates, and a fragile fiscal position, along with the upcoming elections and the fallout from geopolitical tensions, is expected to continue,” said Rachel Gerring, IPO Leader at EY Americas.
The Asia-Pacific region closed the quarter with 188 IPOs for $42.7 billion, down 16% in number but up 18% in amount from the same period last year.
For its part, in the EMEIA region (Europe, Middle East and Africa) 96 issues were reported for 9.3 billion dollars, a decrease of 38 and 68%, respectively.
Refinitiv data shows that Wall Street did not see an IPO for the first time since 2008.
Meanwhile, IPOs in China totaled $17.1 billion in the first quarter of 2022, down 36% compared to 2021 levels.
A report indicated that amid heightened market volatility, Russell US Index IPOs fell sharply. In the first quarter of 2022, there were no IPOs on the Russell 1000 and only eight on the Russell 2000.