Reasons for the decline in the number of IPOs in the U.S.: a market overview
According to market analysis by Dealogic, since the beginning of the year, the number of IPOs conducted in the U.S. fell by 72%. Volatility has affected the volume of funds raised, it fell by 94%.
During the first quarter, only 22 companies carried out initial public offerings in the U.S. market. They were able to raise a total of $2.3 billion. According to experts, the figures are significantly lower compared to the same period last year when IPO held 79 companies and the amount raised was fixed at $36 billion.
The reasons for these trends are several factors, one of the keys is considered the volatility of the stock market. In addition, in the U.S., as in other countries, inflation continues to rise, and the government is raising interest rates. General tension in geopolitical terms and the high risk of a new wave of COVID-19 aggravate the situation. Assessing the impact of all the above nuances, many companies refuse initial public offerings and postpone the procedure for a few months. Among the latter is Chobani, which produces yogurts. It was supposed to hold an IPO in the first half of this year but then announced that it was postponing the listing until at least the end of 2022.
Despite a serious decline in activity on the stock market, experts are quite optimistic. They are confident that the situation will stabilize in the near future, and companies will find the best solution for an IPO under favorable conditions for them. Contact lens manufacturer Bausch & Lomb is planning to enter the market in the near future. The company is ready for an IPO if the environment is favorable for this.
IT company Mobileye from Israel intends to withdraw from Intel in the near future, for which it will conduct a listing. According to preliminary estimates, its value could reach $50 billion.
As for changes in investors’ strategy, they focus on businesses that demonstrate stable profit growth. In turn, there is less interest in companies that only promise active growth of indicators. Last year, a large number of startups that broadcast ambitious development plans came to the stock exchange, but only a few of them showed really good results. According to analysts, the share price of such companies has fallen by 46% since the IPO.
Businessmen are forced to change their approach to investing by the novelties in the monetary policy of the U.S. regulator. If previously market participants wanted to achieve high growth regardless of the level of risk, many prefer more stable options for income now.
According to experts, the first indicator of improvement in the stock market will be an increase in the volume of additional offerings of company shares.