Global IPO deal value halves in first quarter

After reaching record levels in 2021, the global IPO (Initial Public Offering) market slumped sharply in the first quarter of this year. The reason lies in the uncertain market conditions, partly due to the war in Ukraine.

In the first quarter of 2022, 321 transactions were closed in the global IPO market, which collectively raised approximately $54.4 billion. This represents a decrease of 37% and 51% respectively from the previous year, according to an analysis by EY.

In January, the IPO market was not a problem and it was even a very strong opening month. In fact, in terms of realized revenues, it was even the “strongest opening month in 21 years”. Still, in the days and weeks that followed, as a result of the Russian invasion of Ukraine (on February 24, 2022), equity markets took a major hit. In the wake of these developments, the IPO market also saw the appetite for IPOs fall rapidly.

On the US continent, IPO activity stalled at the end of the quarter at a total of 37 deals, with revenues of approximately $2.4 billion. This represented a 72% drop in deals and a 95% drop in revenue year-over-year. In the EMEA region (Europe, Middle East, India and Africa), 96 IPO deals were closed for a total of $9.3 billion, a decrease of 38% and 68% respectively.

The EY report also shows that the war between Russia and Ukraine has had a significant negative impact on the IPO market. In addition to geopolitical tensions, stock market uncertainty and growing concerns about rising commodity and energy prices, the threat of hyperinflation, rising interest rates and an overall uncertain future can also be considered.

Many IPOs postponed

For this reason, investors have become more cautious and many companies are postponing their IPOs. The best-known examples of this in their own country are Coolblue and Blokker, although there was already a postponement before the outbreak of the war, which was also mainly driven by the Covid-19 uncertainty.

According to Bloomberg, about 50 companies have canceled or postponed their IPO plans since the end of February. These companies include food and agri giant Olam (which was planning an IPO in London) and the shopping center branch of the Chinese conglomerate Dalian Wanda (they wanted to raise as much as $3 billion with an IPO).

Looking ahead, EY experts expect market volatility to continue for a while. “Geopolitical tensions, the ongoing Covid-19 situation, supply chain problems, tighter monetary policy and rising costs will continue to plague markets,” said Paul Go, EY’s Global IPO Leader.

As a result, there will be a “backlog of IPO candidates” and it will be “absolutely necessary” for IPO-dependent companies to properly map out how these challenges will affect their markets and business models.”

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