U.S. initial public offerings plunged to their lowest level in six years in the first quarter of 2022. But once stock-market conditions improve, there are plenty of IPO candidates in the pipeline ready to go.
There were only 18 IPOs in the first quarter, compared with 84 in the fourth quarter and 101 in the year-ago period. Proceeds raised plunged 95% from the year-ago period to $2.1 billion.
About 137 companies are currently in the IPO pipeline, expecting to raise more than $22 billion, according to Renaissance Capital, which runs two IPO-based exchange traded funds.
Renaissance estimates there are about 90 companies in the "active pipeline." These are companies that have filed or updated their IPO plans within the last 90 days. By sector, the active pipeline is led by technology companies with 21, health care with 19, and consumer discretionary with 15.
However, most of these public offerings are considered small. In terms of proceeds, the median deal size of the active pipeline is just $30 million. In 2021, the median deal size in the active pipeline was roughly $75 million to $100 million.
The Billion-Dollar Babies Of 2021
In 2021, six of the 10 largest public offerings were tech deals, each raising more than $1 billion. These were Coupang, DiDi Global, GlobalFoundries, Bumble, AppLovin and Playtika.
Currently, just two companies are in position for billion-dollar IPOs.
One is Bausch & Lomb, the eye care company, which might raise up to $3 billion, Renaissance estimates. It's a spinoff of Bausch Health. The other is financial firm SAFG Retirement Services. It also looks to raise $3 billion.
When counting IPOs, Renaissance separates Special Purpose Acquisition Companies from traditional IPOs. But SPACs are hurting as well, with activity slowing to its lowest level in two years.
"SPACs are now facing greater scrutiny from regulators and investors alike, and poor post-merger returns and rising redemptions are weighing heavily on activity across the entire SPAC life cycle," Renaissance said. "We are still seeing new filings and deals getting done, but the numbers are steadily declining."
Potential Blockbuster IPOs In 2022
If market conditions improve, there are several potential blockbusters that could surface in 2022.
Perhaps the most anticipated IPO is Stripe. The San Francisco-based payment processing giant was valued at $95 billion in a 2021 funding round that raised $600 million.
Another San Francisco firm, Databricks, has a valuation of $38 billion. The cloud-based data-warehouse company aims to simplify and improve database management. Databricks says it's on track to generate revenue of $1 billion or more this year, up more than 75% from 2021.
Intel recently announced that it will take Mobileye public, but retain majority ownership. Mobileye makes advanced driver-assistance technology. Intel acquired Mobileye for $15 billion about four years ago. The IPO could value Mobileye at more than $50 billion, a Reuters report said.
Another possible IPO is Discord, a social media and video-game chat company. Microsoft tried to acquire Discord for $10 billion last April. In September, Discord raised $600 million in funding, giving it a $17 billion valuation.
Reddit is another company reportedly mulling an IPO. The company has a devoted online community with tens of thousands of subgroups dedicated to an endless array of interests.
Another possible IPO this year is Plaid, a financial services company. Plaid has a data transfer network that powers fintech and digital finance products.
Reasons Why IPOs Stalled
There are several reasons why the IPO market stalled in the first quarter.
As the quarter began, IPO activity was at a modest pace. It then slowed amid global stock market declines, professional services firm EY said in its first-quarter IPO report.
Uncertainties following Russia's invasion of Ukraine and the subsequent rise in oil prices contributed to the slowdown. Inflation and potential interest rate hikes also spooked the market, as did continuing concerns about the Covid-19 pandemic risk.
"As many uncertainties remain, the market will remain volatile with a backlog of IPO candidates and pipelines will continue to build up," said Paul Go, EY Global IPO Leader, in written remarks with the IPO report.
Should the IPO market regain momentum, here are some notable tech IPOs currently on file:
India-based Coforge looks to raise $750 million. The multinational information technology company was formerly known as NIIT Technologies.
Turo, called the Airbnb for cars, plans to raise $300 million. It has developed a peer-to-peer car-sharing platform.
Justworks, which provides human resources software for nearly 9,000 customers, put its IPO plans on hold in January. It is back in the active pipeline but hasn't said how many shares it will offer or at what price.
Basis Technologies, formerly known as Centro, looks to raise $100 million. It provides data analysis technologies for online digital advertising clients.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
