- High level of volatility causes the number of IPOs worldwide to fall by 54 percent from the previous year to 305
- Investors are becoming more selective and at USD 41 billion their investments are 65 percent down on the second quarter of record year 2021
- Switzerland saw one IPO and one reverse merger in the second quarter of 2022
- Technology and energy IPOs are in demand – greater focus on sustainable and profitable business models
Faced with geopolitical tensions, rising interest rates and a high level of volatility on stock markets around the world, the recovery on the global IPO market has yet to emerge: Despite the difficult capital market environment in the second quarter of 2022, 305 companies ventured onto the stock market – 54 percent fewer than in the second quarter of the record year 2021. The issue volume fell by as much as 65 percent to USD 40,6 billion.
The USA and Europe as stock market locations were similarly severely impacted: Compared with the second quarter of the previous year, the number of IPOs in the United States fell from 119 to 30, and the issue volume actually shrank by 95 percent from USD 43 billion to just over USD 2 billion. In Europe, the number of IPOs decreased from 166 to 43, and the issue volume contracted from USD 23 billion to just over 1.5 billion.
Significantly smaller reductions were seen on the Chinese market: In China (including Hong Kong), 93 companies went public in the first quarter, i.e. 43 percent fewer than in the same period last year. The issue volume fell by one third from USD 31 billion to USD 21 billion.
These are the findings of the current IPO barometer published by auditing and consulting firm EY.
Cautious investors – pipeline of stock market candidates remains well filled
There are many and varied reasons why the IPO window is currently closed for many companies. “This is due to the high level of market volatility while market liquidity remains tight. The war in Ukraine has led to a considerable rise in political and economic uncertainties; in addition, the high rate of inflation and the reversal of the interest rate policy which has now started are keeping global markets in suspense. Investors are being cautious with regard to IPOs or are being more selective in their investments. The companies are obviously waiting for the right moment,” stated Tobias Meyer Head of Transaction Accounting and IPO Services at EY Switzerland. “The second half of the year could see significantly more activity. The worldwide pipeline of stock market candidates is well filled and there is great interest in an IPO,” Meyer emphasized.
Energy IPOs generate the highest amounts
Most IPOs in the second quarter took place in the technology (61) and commodities (60) segments. The highest issue volume was, however, seen in the energy sector in which 25 IPOs generated investments totaling USD 15.6 billion. All in all, what are known as “equity stories” relating to energy transition and connected to ESG (environmental, social and governance) are attracting a great deal of investor attention across all sectors.
“Technology shares have come under pressure in recent months, with considerable price losses in some cases,” continued Tobias Meyer. We are, however, seeing that promising young tech companies are increasingly deciding in favor of a strategic IPO. These companies tend to choose a stock market in Asia or Europe.” Of the 61 technology IPOs in the second quarter, 42 were in Asia, 13 in Europe and only two were in North America.
"As soon as the general conditions improve, larger technology IPOs will experience a comeback", declared Tobias Meyer. Furthermore, investors expect a stronger focus on the sustainability and profitability of the business model.
“Over recent years, more than one hundred startups with a valuation in excess of one billion – generally referred to as unicorns – have come into being, the majority of which will probably head for an IPO,” said Meyer, expressing his expectations. “In addition, there will be major spin-offs from industrial groups and conglomerates that will also find their way onto the capital market.”
SPAC issues continue to fall, more indirect IPOs possible
The SPAC boom is leveling off: After a total of 72 SPAC transactions were counted worldwide in the first quarter of the current year, the number in the second quarter stood at 26. The issue volume contracted from USD 11.4 billion in the first quarter to USD 3.1 billion in the second quarter.
According to EY’s survey, there are currently around 660 active SPACs around the world, their coffers being well filled with more than USD 160 billion. Most of these SPACs – including some from the previous year – are under time pressure. They have to invest the money they have amassed within 24 months. Alternatively, they can merge with a shell company – both in Europe and the USA.
In the second quarter, SIX saw one IPO and one reverse merger
In this demanding environment, IPO activities in Switzerland were at a low level, as expected. Correspondingly, there was only one IPO and one reverse merger on the Swiss stock market: The real estate company EPIC Suisse floated on the SIX at the end of May with an issue volume of CHF 192 million. In addition, Kinarus Therapeutics Holding achieved a Swiss stock market listing by means of a reverse merger with Perfect Holding.
The largest IPOs: energy suppliers from the United Arab Emirates and a Chinese oil company
The largest IPO worldwide in the second quarter was the initial listing of the energy supply company Dubai Electricity & Water Authority which brought in USD 6.1 billion. The Chinese oil company China National Offshore Oil Corporation (CNOOC) went public on the Shanghai stock market, generating an issue volume of USD 5.1 billion. Third place was taken by Life Insurance Corporation of India, whose issue volume from the IPO on the National Stock Exchange of India amounted to USD 2.7 billion.
None of the largest ten IPOs in the second quarter took place in Europe or the USA: Four were held in China, two each in India and the United Arab Emirates, and one each in Indonesia and Canada.
The detailed results of the IPO Trends Report can be found in the PDF.
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