The slowdown of global IPOs continued into the first quarter 2023, and it is expected to continue in the months ahead as companies prepare for the impact of the volatile stock market, rising interest rates, inflation and the uncertainty surrounding the banking crisis.
According to a report released by EY on Thursday, 299 companies in the world have gone public over the last three months. This is 8% less than the same period last year. The funds raised by these listings fell 61% on an annual basis, reaching $21.5 billion.
According to EY, the slump comes after a drop of 45% in the number IPOs that took place last year.
In a statement released on Thursday, the firm stated that "through just one quarter in 2023 it was more of what we saw for the stuttering IPO market around the world."
The unexpected inflation and interest rates outlook quickly dampened any initial euphoria that was felt at the beginning of the year. In addition, the recent turmoil in the global financial system further dampened the mood.
Since months, investors have struggled with rising interest rates and living costs. Recently, investors have also been unnerved due to historic upheavals in the banking sector, which resulted into emergency interventions by Credit Suisse, Silicon Valley Bank Signature Bank and First Republic Bank.
EY's report stated that this ultimately means "companies wait for the stock market to stabilize and recover before listing."
Ringo Choi is EY's IPO Leader for Asia Pacific, a region which saw a drop in listings in the third quarter. He said that there was a backlog of companies interested in going public.
Choi cites public filings to say that "800 companies are in the pipeline" in Mainland China.
He told CNN that many companies around the globe are waiting, especially because they are discouraged by the lack of return for those products which have been on the market recently.
Choi stated that "most of them reported a loss." People start to worry and ask, 'What's the point of getting an IPO'? Why don't people wait?
Choi expects that the decline will continue until the summer at the earliest. According to EY, things could turn around by the end of this year, as "peaking energy prices, falling inflation and a rebound in mainland China's economic growth" will help investors gain confidence.
Choi said that the global economy would rebound in the second half 2023. He believed the market had already reached its bottom.
He said, "We are lying on the ground." It is easy for us have a rebound.
Choi said that governments around the globe are promoting IPOs within their jurisdictions. This could lead to a revival.
Choi stated that Hong Kong Chief Executive John Lee recently visited Saudi Arabia to encourage companies to list in Hong Kong.
Investor confidence should return once there is proof of a more secure market and greater certainty," EY stated in its statement.
The firm stated that "some prominent companies who had delayed IPO plans could restart their plans, albeit with a more modest valuation."
LINK & __LINK__etwork, Inc., a Warner Bros. Discovery Company. Discovery Company.