Evening Brief – 07.14.23
US initial public offerings raised $8.8 billion in the first half of 2023, an 87% increase over the same period last year but a far cry from the $84.2 billion surge during the first six months of 2021, according to the Global IPO Trends report from EY. IPOs garnered only $4.7 billion in the first half of last year.
Global IPOs have lagged the total for the first six months of 2022 given weak economic growth, elevated interest rates and geopolitical concerns. As such, 615 IPOs raised only $60.9 billion, posting declines of 5% and 36%, respectively, compared with the first half of last year, according to EY.
“High interest rates and poor post-IPO share price performance have also pushed investors to look for other investment asset classes,” the report noted.
This year companies have listed on global markets at lower, “more sustainable valuations” compared with the first six months of 2022. As of June 19, 32% of IPOs listed traded below their offering price compared with 45% for those that went public last year.
Still, the EY team says there is reason to believe the IPO market can gather momentum in the remainder of the year, citing depressed equity market volatility, falling inflation and a strong performance from growth stocks.
“Despite the continued slow pace of IPOs, recent improvements in market sentiment and the uptick in follow-on activity could be a harbinger for brighter days in the IPO market later this year or next year,” noted Mark Schwartz, the Americas IPO and SPAC advisory leader at EY.
The impressive debut of restaurant chain Cava Group last month, with its shares nearly doubling, could be interpreted as evidence that the market is turning the corner and investors are itching to deploy cash. Companies who want to go public but are unable owing to the economic situation may reconsider their positions.
“Now is the time to activate your IPO plans and build muscle around operating as a public company,” EY Americas IPO Leader Rachel Gerring said. “Preparation is key to capitalize on potentially fleeting market windows with confidence.”