Despite volatility in the capital markets, one of the fastest and most compelling ways to raise funds continues to be through an IPO.
With the uncertainty of market recovery looming over investors and executives, 2022 has already seen a 41% global decrease in IPO volumes and a 57% decrease in IPO values year-over-year.
IPO trends 2022
2021 was record-breaking for IPO, but in 2022 the IPO market experienced a dramatic slowdown. Here are some fuels and outcomes from such a dramatic decline:
- Skyrocketing inflation. The global inflation surge made central banks hike interest rates and tighten monetary policy.
- Increased volatility. Heightened volatility caused by macroeconomic factors, Russia’s invasion of Ukraine, and other geopolitical strains decreased IPO activity significantly.
- Lockdowns in China. Dozens of Chinese companies suspended their planned IPOs because of the restrictions and inability to complete due diligence.
- Poor performance of companies that went public in 2021. 80% of IPO stocks from 2021 are trading below their offer prices now. The return of offerings from 2021 is minus 30%.
- Fall of the SPAC market. The number of IPOs by special purpose acquisition companies (SPACs) decreased to the level of 2016 and 2017.
According to Paul Go, the EY global IPO leader, the main IPO trends for YTD 2022 were the following:
- There were 992 IPOs raising $146B in proceeds, reflecting decreases of 44% and 57%, respectively, year-over-year.
- The technology sector continued to lead by number, but the average IPO deal size decreased from $261m to $123m.
- Energy sector was the top IPO fund raiser with an average deal size increase of 176%.
- Consumer products sector saw the most significant decrease in average deal size — 69%.
- The 10 largest IPOs by proceeds raised $40B, with energy dominating three of the top four deals.
IPO trends in H1 2022
After a record year in 2021, a sharp decline in IPO H1 activity was seen all around the world across most major markets in H1 2022.
The Americas market saw the biggest drop in deal numbers — 80% less than the same period in 2021.
SPAC IPOs represented half of the activity. There were 17 deals and $2.2b of proceeds.
The finance sector dominated and took up about 35% of all IPOs. It was followed by the health technology sector, which took approximately 20%.
Asia Pacific region
Almost 50% of all deals in the global IPO market were completed in the Asia-Pacific, making it the most active region.
The activity was mainly driven by India and China IPO where over 90% of total Asia-Pacific proceeds took place.
The most active sectors were biotech, health care, and technology.
The European IPO market was largely closed for most issuers. It represented 15% of global IPO deals and 4% of proceeds.
Italy saw the most activity in IPO as a chemicals company rose $500M by going public.
The UK experienced a 71% decline in volume and 99% in proceeds, having 13 IPOs that raised $149M.
The Middle East and North Africa (MENA)
Despite the tensions in the global economy, the MENA region saw a 500% year-over-year increase in the number of companies going public.
There were 15 IPOs in Q1 2022 and nine IPOs during Q2 2022 that together raised about $13B.
UAE and Saudi Arabia dominated IPO activity. UAE experienced its largest IPO in its history with DEWA raising $6.1B.
IPO trends and projections for Q4 2022
Strong headwinds such as declining valuation, skyrocketing inflation, the weak performance of capital markets, and geopolitical tensions will likely prevent companies from going public in the last quarter of 2022.
Consequently, even though some companies are preparing to go public, a surge in IPO activity is expected by the end of 2023.
Here are the main projections for Q4 2022:
- Companies waiting to go public have to be well prepared when entering the IPO markets as they will encounter much lower valuations than in 2021.
- Mainland China and the Middle East will be more attractive to investors in comparison with other regions.
- The green energy sector will lead by proceeds from bigger deals as oil prices are skyrocketing. It makes people switch to renewable sources of energy faster.
- The technology sector is likely to lead in terms of deal number as more technology companies are looking for platforms that can offer consumers a wider range of services.
- ESG will remain a core value for investors and IPO candidates. Companies committing to make the world a better place and incorporating ESG (environmental, social, and corporate governance) values in their culture will attract more investors.
5 largest IPOs in 2022
Money raised: $10.7B
Pricing date: January 14, 2022
Country: South Korea
LG Energy Solution is a South Korean eco-friendly battery company. It created Korea’s first lithium-ion battery in 1999. Later, it became a supplier to global car producers, such as Audi, Volvo, Ford, Chrysler, and Renault.
In the first quarter of 2022, the company had the largest IPO worldwide and raised about $10.7b. Its shares surged 68% on the first day and 40% in a month after it went public.
Now LG Energy Solution is worth over $98 billion which makes it the second-largest Korean company after Samsung.
Money raised: $6.1B
Pricing date: April 6, 2022
Country: The United Arab Emirates
DEWA is a public service infrastructure company formed in 1992 by the merger of the Dubai Electricity Company and the Dubai Water Department. Both organizations were founded by Sheikh Rashid who ruled Dubai at that time.
Today DEWA provides electricity and water to almost 1 million customers with a happiness rate of about 95%. It’s also ranked as one of the best utility companies in the world.
After it went public, the company’s shares jumped 16% on the first day and 10% in a month.
Today this is the largest listing in the UAE. Besides, this is the largest listing in the Middle East since the IPO of Saudi Aramco, a Saudi Arabian oil company that raised $25.6B in 2019.
Money raised: $1.6B
Pricing date: January 26, 2022
Jinko Solar is a Chinese solar panel manufacturer based in Shanghai. The business focuses on the research and development of photovoltaic products and clean energy solutions. The company serves more than 3,000 customers and markets its products worldwide in 160 countries.
Jinko Solar was listed on the STAR Board of the Shanghai Stock Exchange in January 2022. It’s the second largest IPO in the first quarter of 2022.
The organization raised $1.6B and showed an excellent after-market performance. It closed 111% above the issue price on the first day of trading and 132% one month after it.
Money raised: $2.7B
Pricing date: May 12, 2022
Life Insurance Corporation of India (LIC) is an insurance and investment company. It was founded in 1956 and is owned by the Indian Government. It’s the most trusted insurance company in the country with over 250 million customers.
It went public in May 2022 and raised $2.7B, breaking India’s record as the country’s biggest IPO. It also became the fourth-largest IPO in the world in 2022.
But a record-breaking and oversubscribed IPO raised far less than the government expected. LIC’s shares slid nearly 8% in its market debut. And since May, the shares have plunged 29%. India’s biggest-ever IPO now ranks second in terms of market capitalization loss.
Money raised: $2B
Sector: Basic materials
Pricing date: May 31, 2022
Country: United Arab Emirates
Borouge is a provider of innovative polyolefin solutions and produces plastics for manufacturing and consumer goods. The organization was founded in 1998 and now supplies polyolefin to customers in 50 countries across the Middle East, Asia, and Africa.
In May 2022, the company was listed on the Abu Dhabi Securities Exchange and became Abu Dhabi’s largest IPO, raising $2B.
The shares surged 22% on the first day of trading, valuing Borouge at $24B. It made Borouge the sixth largest company on ADX.
- There’s a considerable decline of 44% in the number of IPOs and a 57% drop in proceedings, in contrast to IPO trends 2021.
- The main reasons for the decline are COVID-19 restrictions, the Russian invasion of Ukraine, geopolitical uncertainties, economic tension, and rising interest rates.
- The technology sector leads by deal number, and the energy sector leads in proceeds.
- The Americas and Europe markets recorded the most considerable decline, while MENA and the Asia Pacific regions were the most active in terms of volume and number of IPOs.
- The five largest IPOs in 2022 were LG, DEWA, Jinko Solar, Life Insurance Corp of India, and Borouge.
Guide on going public
Preparation is prized in the IPO market, and starting early is crucial to success.
To support executives during this stage, the M&A Community, in collaboration with iDeals, published the IPO Consideration Stage white paper, painting the full picture of the key points to consider before deciding to go public while doing so is still under evaluation.
Download the whitepaper here.