After a record year for initial public offerings in 2021, the IPO market this year has been crushed, due to market volatility, rising geopolitical tensions and economic weakness, according a report Tuesday by EY.
Globally, there were 305 IPOs in the second quarter this year, down a sharp 54% from the year-ago period. Proceeds raised plunged 65% to $40.6 billion, said EY, the professional accounting and advisory firm.
Across the Americas, IPOs fell 73% to 77. Proceeds collapsed 95% to $5 billion.
"IPO activity across the Americas remains muted amid macroeconomic headwinds that continue to impact performance and valuation," Rachel Gerring, EY Americas IPO Leader, said in written remarks. "These headwinds have led to a 'wait-and-see' approach."
Pressure on the U.S. IPO market also comes from rising interest rates, supply-chain disruptions, elevated commodity prices and recessionary fears.
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In the second quarter, the largest IPOs by proceeds came from the energy sector, with four in the top 10, replacing technology.
IPO Market Trading Below Offering Price
Also troubling, an overwhelming majority of IPOs in 2021 are trading below their offering price. Average performance is trailing broader market declines as well. This has reduced investor appetite to participate in new transactions.
This also spells bad news for Special Purpose Acquisition Companies, or SPACs. Market performance of closed SPAC mergers has trailed the broader market indexes. That has negatively impacted the pace of new SPAC merger announcements. Regulatory uncertainty is also a dark cloud over SPACs.
"In 2022, redemptions have increased significantly, making closing SPAC mergers more challenging and reducing the amount of funding available for the new public companies," the EY report said.
SPAC IPOs in the U.S. dropped 80% to 71 during the first half of this year. Proceeds cratered 88% to $12 billion. Market conditions could potentially cause the end of the SPAC boom, EY said.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
