The fall in the amount and value of IPOs has been significant this year. Over a longer term period, there have been fewer of them than was the case in the 1990s dot-com era; since the Sarbanes-Oxley legislation in the US, some of the fizz has gone from the IPO space, although big flotations include those of Facebook, for example.

Initial public offerings – important liquidity events which wealth managers track – slumped by 50 per cent in the final quarter of this year from a year earlier, reaching 334 transactions.

The value of IPO issuance slumped by 73 per cent to $31.9 billion, according to EY, the audit and advisory firm.

The picture is similar for the year as a whole: the number of IPOs worldwide fell by 45 per cent to 1,333, while issue volume shrank by 61 per cent to $180 billion. Nevertheless, compared with the pre-pandemic year of 2019, the number of IPOs increased by 16 per cent this year. 

Sharp falls to most equity markets since January as central banks have hiked rates to curb strong inflation have hit certain sectors, such as technology. In that environment, appetite to float on the world’s stock markets has fallen significantly. 

Worldwide, a total of 278 companies postponed or canceled IPOs already announced this year – significantly more than the 10-year average of 202, the report said. 

In 2022, the strongest declines, compared with the strong previous year, were recorded in the US, where the number of IPOs fell by 78 per cent and the issue volume plunged by 94 per cent. In Europe, the number of IPOs fell by 70 per cent and their value by 78 per cent. 

IPO activity was more stable in China (including Hong Kong), where the number and total value of new issues each shrank by 22 per cent. China's market share of the global IPO market – in terms of global issuance volume – rose correspondingly sharply from 28 per cent in 2021 to 55 per cent in the current year. 

"After the record year [of] 2021, 2022 was characterized by high levels of volatility triggered by geopolitical tensions, high inflation and stiff interest rate hikes," Tobias Meyer, head of transaction accounting and IPO Services at EY in Switzerland, said.

The fourth quarter of 2022 was the weakest fourth quarter in more than 10 years, both in terms of numbers and proceeds.

Financial investors slashed their exit activities. In 2022, the number of company IPOs from private equity fund portfolios fell to 65 – a 20-year low. In the previous year, 286 such transactions had been counted.

End of the SPAC boom
In other areas, the market for special purpose acquisition companies, aka blank-check companies, has slumped, contrasting with a hectic period around two years ago. After a total of 682 SPAC transactions were counted worldwide in 2021, the number fell to 155 in 2022, or -77 per cent. The global issue volume shrank by 90 per cent from $172 billion last year to $16.5 billion in 2022. (See an article here about SPACs.)

There are around 480 SPACs around the world looking for target companies – 80 per cent of which will expire by mid-2023. This means that they are under intense time pressure to invest the money they have raised, EY said. In the US, SPACs must deploy the raised capital within 18 months, or return it to investors.