IPO momentum continued to slow from Q1 into Q2, resulting in a “considerable decline” in both deal numbers and proceeds, with deals down 46% for the first half of the year, according to the latest report from EY.
It said that heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter. The dramatic slowdown in IPO activity in YTD 2022 after a record year in 2021 was experienced across most major markets.
It found that for Q2 2022, the global IPO market saw 305 deals raising $40.6bn (£33.9bn) in proceeds, a decrease of 54% and 65%, respectively, year-over-year (YOY). Through YTD 2022, there were a total of 630 IPOs raising $95.4bn (£79.8bn) in proceeds, reflecting decreases of 46% and 58%, respectively, YOY.
The 10 largest IPOs by proceeds raised $40bn (£33.4bn), with energy dominating three of the top four deals, replacing the technology sector as the top IPO fund raiser. The technology sector continued to lead by number, but the average IPO deal size came down from $293m (£245.5m) to$137m (£114.7m), whereas energy has overtaken to lead by proceeds with average deal size increasing from $191m (£159m) to $680m (£569.2m) YOY.
The Americas region completed 41 deals in Q2 2022, raising $2.5bn (£2bn) in proceeds, a decline of 73% in the number of deals and a 95% fall in proceeds YOY. The Asia-Pacific region recorded 181 IPOs, raising $23.3bn (£19.5bn) in proceeds in Q2, a decline YOY of 37% for volume and 42% in proceeds.
It also found the EMEIA market IPO activity in Q2 2022 reported 83 deals and raised$14.8bn (£12.3bn) in proceeds, a YOY decline of 62% and 44%, respectively.
Given the tightened market liquidity and significant decline in stock prices of many new economy companies that went public during the last two years, investors are becoming more selective and are refocusing on the companies’ fundamentals instead of just “growth” stories and projections; e.g., sustainable profits and free cash flows.
Paul Go, EY global IPO leader, said: “Investors are refocusing on companies with resilient business models and profitable growth, while embedding ESG in their core business values.”