August 23, 2022
All Quiet on the IPO Front
For those who practice in the capital markets area, it should come as no surprise that the WSJ reports IPOs are dead for now – in a big way. Citing recent Dealogic data, the WSJ notes that, so far this year, traditional IPOs have raised only $5.1 billion, way off the $33 billion pace that is typical at this point in the year (going back to 1995). Last year at this point, traditional IPOs had raised more than $100 billion.
Not surprisingly, the last time we saw the IPO market this slow was back in 2009, during the dark days of the post-financial crisis Great Recession. Even with the market window closed at the moment, there is certainly hope that companies will be clamoring again to go public. The article notes:
Even though the IPO market isn’t healthy right now, many companies still have a burning desire to go public, bankers say. Some need the cash. Others are running against a ticking clock for restricted stock units issued to employees through vesting plans. And some are eyeing acquisitions but need stock or money to complete offers.
A number of economic and market factors point to continued uncertainty in the financial markets and therefore a tough sell for risky assets such as IPOs – high inflation, rising interest rates, recession, the war in Ukraine and countless other reasons for a high degree of market volatility and as overall negative outlook.
One of the most frustrating things for those practicing in capital markets (and no doubt for the bankers and people working at companies seeking to go public) is the way in which the “window” for IPOs opens and shuts over time. As a result, you can be working hard to get an IPO to the finish line one day, and then the next day you get the inevitable order to go “pencils down.” Then, when the window cracks open again, a frenzied effort commences to try to get the IPO done before the window closes again. For some IPOs, this cycle can happen several times. My advice to those new to the practice or for those considering an IPO is pretty much “get used to it.” IPOs are viewed as among the riskiest of investments, and therefore they require the perfect set of market circumstances to facilitate their marketing. We will get through this latest IPO drought, and the IPO window will open again – it is just a matter of time.
– Dave Lynn