The IPOs of companies around the world raised a historic total of $ 594 billion in 2021 thanks to the wave of euphoric bull markets. Its subsequent stock market performance often ended up disappointing investors, however.
From tech start-ups to “blank check” or special purpose purchasing (SPAC) companies flooded the market with stock offerings, taking advantage of investors’ willingness to make speculative bets.
Low interest rates and the reopening of economies with Covid-19 vaccines fueled the appetite for risk.
“It has been a truly euphoric capital market when viewed in the context of new issuance activity and in particular the creation of new listed companies,” said Andrew Wetenhall, Co-Head of Equity Capital Markets for the Americas. Morgan Stanley.
Some of those bets worked. Those who went to the $ 1.2 billion IPO of Paypal Holdings-backed loan company Affirm Holdings in January have more than doubled their investment, compared with a 25 percent return on the S&P 500 index.
“It has been an extraordinary year for raising capital around the world. It is unlikely to be repeated anytime soon.”
James Fleming, global co-director of Citigroup’s capital markets
But many other cases have soured after debut. Shares of Swedish vegan milk maker Oatly Group, which raised $ 1.4 billion at its New York IPO in May, are down 53 percent, while those of British food delivery company Deliveroo, which raised £ 1.5 billion at its London premiere in March is down 46 percent.
The Renaissance IPO Index, which tracks the average performance of new IPOs in the United States, is down about 8 percent for the year, compared with a 25 percent rise for the S&P 500 Index.
Some bankers warned that the shares of some of the companies that went public in 2021 continue to trade at historically high valuations, even if they took a hit after going public. This is because many investors were willing to pay a lot for these companies in private fundraising rounds in the lead up to their stock market debuts.
“The problem is that the buyers of these IPOs, as well as those who bought shares after the initial listing, are seeing losses,” said Paul Abrahimzadeh, co-head of capital markets for North America at Citigroup.
IPOs grew 51% year-over-year in 2021
A total of 2,097 IPOs, excluding SPACs, raised $ 402 billion in 2021 worldwide, according to data provider Refinitiv. This represented an 81 percent increase in collection and a 51 percent increase in the number of IPOs in 2020.
Including SPACs, which are a kind of “shells” of companies that normally start their activity when they have found investors, the income from the IPOs in 2021 reached 594,000 million dollars, according to the data provider Dealogic.
The main sectors that drove the large volumes of stock market debuts were technology and healthcare. This year 426 technology companies and 332 related to the health sector went public, which together represent almost 42 percent of total income from IPOs worldwide during the year, according to Refinitiv.
“The pace of the SPACs was never sustainable and now the market is consolidating. But they will not disappear.”
Eddie Molloy, Co-Director of America Capital Markets at Morgan Stanley
Among the biggest exits in 2021 is that of electric vehicle maker Rivian Automotive, which raised more than $ 12 billion in its market debut in November, making it the biggest debut on US stock markets since Alibaba Group’s in 2014. .
Other major IPOs included Chinese online video company Kuaishou Technology, which raised $ 5.4 billion, and Korean e-commerce giant Coupang, which raised $ 4.6 billion.
“It has been an extraordinary year for capital raising around the world, and I daresay it is unlikely to be repeated anytime soon,” said James Fleming, Citigroup Co-Head of Global Capital Markets.
The regression of the SPAC
The SPACs, which went public in the largest number in New York, raised a total of about $ 160 billion this year, which is 28 percent of total revenue from US IPOs, according to Refinitiv.
These “blank check” companies have been through a roller coaster ride. Investor enthusiasm for them earlier in the year later turned into disappointment at poor profitability.
SPAC’s main exchange-traded fund (or EFT), Defiance Next Gen SPAC Derived, has lost 25 percent of its value so far this year, after peaking in February.
“The peak rate of activity (for SPACs) was never sustainable and now the market is consolidating. But SPACs are not going away,” said Eddie Molloy, Morgan Stanley co-head of America Capital Markets.
The IPOs that will come in 2022
The list of IPOs for the first quarter of 2022 is long, with social media platform Reddit, transportation technology start-up Via, software maker Cohesity, and private equity firm TPG. They have already submitted the necessary documentation to the regulators to quote.
However, investment bankers say the recent lukewarm financial performance of many IPOs means this year’s bonanza is unlikely to repeat itself in 2022, especially if equity markets lose some steam due to inflation. and other financial concerns.
There is also a regulatory risk. The US CNMV has cracked down on the listing of Chinese companies in New York, demanding more information.
Trucking giant Didi Global, which completed its $ 4.4 billion IPO in New York in June, has said it will move its listing to Hong Kong, due to pressure from China on many of its companies to relocate. your stocks closer to home.
“I have to think that (2022) will be a year of decline in global emissions levels,” Fleming said. ● A report by Echo Wang in New York and Abhinav Ramnarayan in London; edited by Greg Roumeliotis and Dan Grebler