IPO market plummets 70% as volatility and inflation dampen risk appetite

The number of Initial public offerings (IPOs) worldwide has plummeted in the first quarter after a record showing in 2021, as volatility stoked by the war in Ukraine and soaring inflation sets investors on edge and scuppers deals. About $65 billion has been…

raised through IPOs in 2022, down 70 per cent from $219bn in the first three months of last year, according to data compiled by Bloomberg.

That puts the global market on track for the lowest quarterly proceeds since the onset of the coronavirus pandemic in 2020.

Still, companies such as renewable energy provider Plenitude and skincare business Galderma are lining up to test investors’ appetite for new shares in the coming months.

Stock market listings set a record in 2021 as unprecedented stimulus measures fuelled a surge in equities to all-time highs. Now, the backdrop could not be more different, with central banks raising interest rates in response to mounting inflation and investors spooked by Russia’s invasion of Ukraine.

“This is probably the worst time in five years in terms of market sentiment,” said Li Hang, head of equity capital markets and syndicate at brokerage CLSA.

Rising interest rates combined with sharp market swings have prompted investors to steer clear of companies with high forecast growth rates yet relatively little in the way of current profits – the kind of stocks that dominate the IPO market.

“You need a more stable market to find the level at which IPOs can clear,” said Saadi Soudavar, Deutsche Bank’s co-head of equity capital markets for Europe, the Middle East and Africa.

The Cboe Volatility Index, a widely watched gauge of expected market swings, jumped above 30 when Russia invaded Ukraine and has had an average reading of about 26 this year, signalling IPOs might be too risky of an investment to receive sufficient appetite.

Historically, a majority of global listings have been priced when the index has been below 25.

Wild market swings have scuttled IPOs from New York to New Delhi.

Life Insurance Corporation, which planned to raise as much as 654 billion rupees ($8.5bn) for the Indian government with an offering before the end of March, now is looking at a mid-May timeline. The offering would be one of the largest global listings this year.

Even quick-fire deals such as blank-check offerings, which are typically priced in a matter of days, are falling by the wayside.

The vehicles, also known as special purpose acquisition companies, are shelving their listings at a record pace this year as investor enthusiasm wanes because of poor returns and heightened regulatory scrutiny.

Investment banks are starting to feel the effects. UBS Group began laying off a handful of bankers in equity capital markets in Europe, the Middle East and Africa this month, sources said.

It is not all doom and gloom, however…

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