EY: Global IPO volumes down by 37 percent in first quarter of 2022

After record-high levels of global IPO activity in 2021, volatile market conditions have resulted in a significant slowdown during the first quarter of 2022, according to EY data. The year started off strongly, continuing the momentum of Q4 2021, with January producing the strongest opening month in 21 years by proceeds. However, by the second half of the quarter, worldwide stock market declines shifted the trajectory dramatically in the opposite direction, resulting in a significant drop in overall activity. For Q1 2022, the global IPO market saw 321 deals raising US$54.4b in proceeds, a decrease of 37% and 51% YOY, respectively.

The sudden reversal can be attributed to a range of issues, both emerging and residual. These include the rise in geopolitical tensions; stock market volatility; price correction in over-valued stocks from recent IPOs; growing concerns about a rise in the commodity and energy prices; impact of inflation and potential interest rate hikes; as well as the COVID-19 pandemic risk continuing to hold back a full global economic recovery.

In line with the sharp decline in global IPO activity there was a considerable fall in cross-border, unicorn, mega (proceeds above US$1b) and SPAC IPOs. There were also a number of IPO launches postponed due to market uncertainty and instability.

Paul Go, EY Global IPO Leader, says: “A decrease in IPO activity was not unexpected when compared with Q1 2021 as the latter was the most active quarter in the last 21 years. However, the market shock from geopolitical tensions and other economic concerns in the second half of the quarter created volatility and impacted the capital markets. While markets continue to be volatile, and uncertainties on economic recovery remain for reasons including continuing concerns around COVID-19, there is a risk that IPO activity will continue to slow further with IPO candidates choosing to postpone their transactions. Companies need to be well prepared to access the market when the window opens, likely for a shorter timeframe, and include a careful review of business models and preparation of alternative fund-raising plans.”

EMEIA’s IPO market affected by market volatility

Recent elevated market volatility from geopolitical tensions unsurprisingly impacted EMEIA equity markets and subsequent corporate activity. Many IPO candidates in the region postponed their IPOs until a clearer picture emerges on the economic outlook. Overall EMEIA saw 96 IPOs, a decline of 38% YOY, proceeds raised were US$9.3b, a 68% decline YOY. On a more positive note, the global financial markets remain open and functioning despite the continued uncertainty.

In the first quarter of 2022, Europe accounted for 15% of global IPO deals and only 5% by proceeds. Two European exchanges were among the top 12 exchanges by deal numbers and by proceeds raised. Deal numbers in Europe were 47 with proceeds of US$2.7b raised. In the UK, the slower pace of IPO activity was due to a dip in investor confidence from Q4 2021 that carried into 2022. Q1 2022 saw eight IPOs in the UK with total proceeds of US$113m, a YOY decline of 60% by deal number and a dramatic 99% fall by proceeds.

Dr. Martin Steinbach, EY EMEIA IPO Leader, says: “The current geopolitical tensions and widespread uncertainty in many EMEIA equity markets are forcing IPO dealmakers to look at alternative options or to consider delaying their IPO until calmer waters arise. We have already seen a number of IPO postponements in the short-term which has resulted in a quiet first quarter of this year. It remains challenging for companies to determine the right timing and alternative strategies that provide access to funding for further growth. IPO candidates should continue to prepare and keep all options open.”