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IPO ETFs Underperform Havoc in 2022: What Lies Ahead?

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After a record year, the global market for initial public offerings (IPO - Free Report) was off in 2022. Initial public offerings on the New York Stock Exchange (NYSE) just nosedived this year. The number of IPOs declined 93% from last year, NYSE president Lynn Martin said at the Reuters NEXT conference on Nov 30, per a source.

Renaissance IPO ETF (IPO - Free Report) is off 51.4% this year while Renaissance International IPO ETF (IPOS - Free Report) has lost 33.3% in the year-to-date frame.  By Nov 15, just 173 companies made their debut in the U.S. stock market, down more than 82% from the 973 IPOs by the same time last year. Total proceeds raised were $7.7 billion this year, down 94.4% year over year, per Renaissance Capital.

U.S. market is likely to record its lowest IPO proceeds since 2003 this year, per EY. There have been 140 technology IPOs, the maximum in any sector. However, the energy sector took the first spot in terms of proceeds with the largest increase of 176%. The consumer products sector has recorded the biggest decline in average deal size (69%).

How Has Global Market Fared?

The underperformance was not limited to North America. Globally, IPO activity between September and November 2022 declined 45% year over year. Year over year, EMEIA IPO activity has declined by 50% and 52% by number and proceeds, respectively.

Europe fell 76% in proceeds, but the Middle East remained a rare winner with a 209% increase in proceeds, despite a 51% decrease in the number of deals, the EY report mentioned. Asia-Pacific too has fared better, with five of the top 10 global IPOs in year to date.

What Caused the Drop?

Rising inflation caused by supply-chain woes and the resultant rise in interest rates, the stock market crash, geopolitical tensions caused by the Russia-Ukraine war, China’s zero-Covid policy and the finally the global growth slowdown led to the mishap in the IPO market.

What Lies Ahead?

It all depends on global growth worries. IPO activity likely won’t recoil much in the first half of 2023, as fears of an economic slowdown remain. There are currently around 200 companies in the pipeline to be listed on the Nasdaq, below the average range of 250-300 seen in the last few years, per Adena Friedman, CEO of the tech stock-heavy Nasdaq, the above-mentioned source noted.

Some analysts believe that activity may recover by the second half of next year, though chances of such a late recovery is also less. Then again, according to Ray Wang, founder and principal analyst at Constellation Research, tech IPOs could make a comeback in 2023, per Yahoo Finance. Some tech companies reportedly eyeing 2023 for an IPO include corporate travel booking startup TripActions, cybersecurity provider Versa Networks, and payments giant Stripe, per the Yahoo.

In the Americas, IPO pipelines are still solid for next year, but in EMEIA, IPO windows still remain compressed, per EY. For APAC, while public filings for IPOs have been moderate, activity and efforts for 2023 remain busy.



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