Year-to-date (YTD) 2022, there have been a total of 992 IPOs raising $146 billion, a 44 percent and 57 percent decrease year-over-year (YOY), respectively, according to audit and advisory firm EY. This follows the trend for the year in which IPO companies and investors were faced with mounting macroeconomic challenges, market uncertainties, increasing volatility and falling global equity prices. Volatility (CBOE VIX average) increased from 19.7 in 2021 to 25.6 in YTD 2022.
YTD, the technology sector continued to lead by number of IPOs, although the average deal size came down from $261 million to $123 million YOY. While the energy sector overtook by proceeds with the largest increase of 176 percent, driven largely by three of the global top five deals in YTD 2022, the consumer products sector witnessed the biggest drop in average deal size (69 percent).
The third quarter (Q3) of 2022 saw the lowest special purpose acquisition company (SPAC) IPO proceeds since Q3 2016, along with de-SPACs struggling to find the right targets. The SPAC market was continually challenged this quarter with only 17 deals, raising $0.9 billion ($900 million). A record number of existing SPACs are actively seeking targets, with the majority facing potential expiration in the next year, according to findings published by EY.
Overall regional performance: taking a wait-and-see approach
According to EY, major economies and financial markets in the Americas and Europe, the Middle East, India, and Africa (EMEIA) remain under pressure as quantitative tightening kicks into a higher gear.
Americas exchanges saw the sharpest decline, recording only 116 deals raising $7.5 billion YTD, a decrease of 94 percent in proceeds and 72 percent in volume YOY. In direct contrast to a record-breaking year in 2021, YTD Americas IPO activity sank to its lowest level in 20 years.
YOY, EMEIA IPO activity fell by 50 percent and 52 percent by number and proceeds, respectively. Europe dropped 76 percent in proceeds, but the Middle East continued to be a rare bright spot with a 209 percent increase in proceeds, despite a 51 percent decrease in the number of deals.
As the region has been less impacted by inflation and geopolitical issues, Asia-Pacific exchanges have performed relatively better, housing five of the top 10 global IPOs in YTD.
YTD, it has also contributed 61 percent and 69 percent of the global share of IPOs and proceeds, respectively. However, it still registered YOY declines of 25% by deal number and 22 percent by deal size.
YTD, Asean saw a total of 96 IPOs raising $3.8 billion, up 4 percent in deal numbers and a decline of 57 percent in proceeds YOY. The notable decline in proceeds was due to a lack of mega IPOs (IPOs with proceeds equal to or greater than $1 billion) in YTD 2022.
Asean exchanges that were most active YTD were Indonesia (45 IPOs raising $1.5 billion), Malaysia (25 IPOs raising $0.7 billion), and Thailand (13 IPOs raising $1.3 billion), followed by Philippines (7 IPOs raising $0.3 billion) and Singapore (6 IPOs raising $33 million).
“With uncertainties being the IPO market’s biggest challenge, companies and investors continue to wait for a more stable and positive stock market sentiment before any sustained appetite for IPO activity re-emerges,” EY Global IPO Leader Paul Go said in a statement on Monday.
Q4 2022 outlook: icebreakers will pave the way
Soaring inflation and rising interest rates are adversely affecting the global equity market. Geopolitical tensions and the COVID-19 pandemic led to more market uncertainty and volatility. All these factors are bringing headwinds for risk assets as we near the end of 2022.
In the Americas, IPO pipelines are waiting for the market to reopen next year, and in EMEIA, tough market conditions continue to squeeze IPO windows. For APAC, while public filings for IPOs have not picked up, activity remains strong in the background as companies evaluate their options for 2023.
“Many companies’ IPO plans were put on ice in early 2022, in anticipation of more favorable market conditions. Providing market uncertainties and volatility subside, the launch of long-awaited blockbuster IPOs together with improved after-market returns may reverse the sentiment and attract more companies to follow,” said Go.
Overall, IPO candidates looking to go public will need to be well-prepared when re-engaging the market as they will face much lower valuations compared with the highs of 2021.