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January 4, 2022

IPOs: 2021 Was a Banner Year – But What Does 2022 Have in Store?

According to EY’s recent Global IPO Trends Report, 2021 turned out to be another terrific year for IPOs. The report says that 2021 was the most active year for US IPOs in the past 20 years, but this excerpt says that the IPO bonanza wasn’t limited to the US. Here are some of the year’s highlights, according to EY’s report:

– Year-over-year (YOY), global IPO activity was up 64% and 67% by deal numbers and proceeds, respectively. EMEIA exchanges recorded the highest growth in IPO activity among all regions (158% by number and 214% by proceeds), which reflects the pent-up demand held back as the European markets navigated Brexit and other geopolitical factors. The US continues to play a dominant role in driving this record global IPO year, while the contribution from Asia-Pacific has been steady but relatively modest as compared to 2020.

– Initial optimism on the COVID-19 vaccine rollout, rebound of global economies from their sharp declines in 2020, and ample liquidity in the financial system from government stimulus programs were among the key drivers of exceptional IPO activity in 2021. Technology-enabled, user-friendly trading platforms helped to attract new groups of retail investors. The buoyant stock markets in the US and parts of Europe, and companies wanting to take advantage of the open window, all contributed to the record IPO performance in 2021.

Despite all the good news, there are some storm clouds on the horizon. As the WSJ reported last week, there’s been a big selloff of new issues in recent weeks, and more than 2/3rds of last year’s IPOs now trading below their initial offering prices. The WSJ attributes the selloff to inflation concerns and a potential oversupply of new issues. EY’s report notes that 2022 IPOs will confront a “combination of geopolitical tensions, inflation risks, and new waves and variants of the ongoing COVID-19 pandemic that hamper full economic recovery.”

Still, EY says that despite these challenges, “relatively higher valuations and market liquidity are keeping the IPO window open” – at least for now. But it also says that companies considering an IPO are likely to face greater volatility, and that they need to be flexible and have financing alternatives available to them.

John Jenkins