TBC Capital published a report on US IPO outlook 2022. According to the report,2021 was a record-breaking year for IPOs a more than 1000 companies hit the market. Total proceeds reached $608 Bn, compared to 2020’s USD 330 billion. By region, the Americas (US, Canada, Brazil, Mexico) contributed highest total amount in 2021.
Tech and Consumer (Discretionary) sector IPOs were the largest in 2021, accounting 21% and 20%, respectively. Followed by industrials and healthcare.
Despite record number of IPOs, the performance needs to be observed. 80% of IPOs in the Americas underperformed in the aftermarket to Dec 31, 2021 and globally 57% underperformed relative to MSCI World Index.
As of the repeort,the stock market has a volatile macro backdrop in the 1st Quarter of 2022, that consists of not only raging inflation, but the Russia-Ukraine war, energy crisis, global supply chain chal- lenges and the shortage of commodities.
>Political uncertainty between the US and China, increased Chinese regulations, together with growing scale of the mainland China and Hong Kong markets, may create downward pressure on IPO volumes of Chinese companies coming to the US
>IPO Activity is expected to Stabilize in 2022 as packed pipeline meets a more cautious market
> Delayed notable IPOs from Q4 of 2021 will likely happen in 2022
>ESG-themed sectors, especially alternative energy IPOs, are expected to be more attrac- tive for investors
>New SPAC regulations amend the “safe harbor” rules and align SPACs more with tradi- tional IPOs, which will likely reduce future SPAC activity from companies, but make it more attractive to investors
>Geopolitical tensions and ongoing Russia conflict as well as rising interest rates are downgrading high IPO valuations
>While many fast-growing tech companies achieved high valuations in 2021, poor returns post-IPO may weight on multiples in 2022, causing investors to turn away from high-growth stocks to more mature companies with sustainable outlooks
Chinese IPO activity was essentially restricted to the first half of the year, with just three China-based companies debuting in the US after June due to the regulatory crackdowns across multiple sectors, as well as China’s new rules for overseas listings. Global Inc. moved in December 2021 to delist its shares from the NYSE at the request of Chinese regulators. The move may set a precedent for other companies and is expected to weigh significantly on issuance in the US going forward. As a result of the changing regulatory landscape, trading for Chinese issuers in the US has suffered. DiDi was the largest Chinese issuer in US, raising as much as $4.4 Billion.
Last year’s worst performers included six Chinese issuers, which sank in the wake of changing regulations. Bottom performers Zhangmen Education and First High-School Education were hit hard by the crackdown in China’s private education sector, while Waterdrop was hurt by tightening regulation in the country’s insurance space.
Stock market listings set a record in 2021 as unprecedented stimulus measures fueled a surge in global equities to all-time highs. This can be seen in US IPO Fillings surging during 2021, marking as the busiest year since 2000.
VIX jumped to 30 in February 2022, when Russia invaded Ukraine and has had an average of about 26 this year, signaling IPOs might be too risky to invest in. Historically, a majority of global listings have been priced below VIX’s 25 level.
While markets continue to be volatile and uncertain economic activity remains, there is a risk that IPO activity will slow down further in 2022 with IPO candidates postponing their transactions, as well as, rising interest rates negatively affecting future valuations.
