Frozen Pipeline: Public Offerings Slow to a Trickle

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Worst Performance In Over Two Decades

Russia’s invasion of Ukraine, rising interest rates, and record high inflation. Those are just a few of the headwinds weighing on the IPO market, which is on track to post its worst performance in over two decades. At this point last year, traditional public offerings had already raised more than $100 billion. So far this year, that same figure stands at just $5.1 billion.

Advisors, bankers, and lawyers who work on IPOs say deal activity has dried up, and that they don’t expect much action for the remainder of 2022. In fact, some companies that were eying 2023 offerings are pushing off hiring bankers, meaning the freeze could last longer than anticipated.

Valuations Slashed

Emboldened by the best year and a half ever for US-based initial public offerings, hundreds of companies were prepping for an IPO in 2022. But a potent concoction of macroeconomic headwinds has forced many to rethink their plans and their valuations.

Sweden-based buy-now, pay-later firm Klarna Bank AB was a hotly anticipated IPO this year. When the market for new listings cooled, it instead raised money privately and slashed its valuation by 85% to $6.7 billion.

StockX is another company that many were counting on to go public, but the company has yet to file paperwork for an IPO and recently laid off 8% of its workforce.

One company that did go public in May was Bausch + Lomb (BLCO). The firm specializes in eye care and priced its stock far below expectations at $18 per share. Its stock has recently been trading between $14-16 per share, which isn’t encouraging for other companies watching the public markets.

Bucking the Trend

According to some analysts, the new IPO playbook is calling for “must own” names that are leaders in their space. These companies should be large and profitable. That’s potentially good news for Instacart, which is pushing ahead with its plan to go public this year. The food-delivery company was profitable in the second quarter and saw its revenue jump 39% in the three months ending in June.

Other companies that might buck the trend include Intel’s (INTC) self-driving car unit, Mobileye, and American International Group (AIG) spinoff, Corebridge Financial. After its failed sale to NVIDIA (NVDA), chip-design company Arm is also eying an IPO early next year.

Zooming out, the IPO freeze is important for Wall Street and Main Street alike, because when fewer companies go public, it’s typically a bad sign for both investors and the economy.

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