The new year brings forth a tough time for IPOs. Globally, initial public offerings worth $26.7 billion have been priced, indicating a 60% fall from a year back. Due to pressure from tumultuous markets, pulled deals have been piled up. Sail through this blog to get the ultimate picture!
What’s the Global Scenario for IPOs?
Hikes in interest rates combined with geographical tensions and slow economic growth have hit global equity markets, marking the worst month of the pandemic. The selloff and the subsequent inclination towards cheaper stocks have greatly impacted the recent IPOs, growth shares and frothier technology.
Cboe Volatility Index, a measure of expected market fluctuations, has hiked 60% in January─ a red flag for the sale of new stocks. In New York, the roiling market has pulled off nine IPOs, inclusive of Four Springs Capital Trust and Justworks Inc. Some special acquisition firm listings worth $4 billion were scrapped during last month.
WeTransfer, a startup of Europe, has called off its Amsterdam IPO on Thursday, 27 January 2022, after failing to increase its demand. Within a day, Cheplapharm Arzneimittel GmbH, a German drugmaker, kept its planned offering on hold. Mishcon de Reya LLP, a U.K. based law firm, has delayed its much-awaited listing. It could have been the world’s largest law firm offering.
Rocky markets and decreasing investor demand have doubled the value of dropped IPOs within a year, crashing $6.2 billion as of now. On Friday, 28 January 2022, Hyundai Engineering Co. Of South Korea has scrapped its $1 billion offering as it failed to draw expected demand. Additionally, Asia’s most active IPO venue, Hong Kong, is experiencing a drop in proceeds by above 40% in 2022 due to China’s regulatory crackdown.
Fund managers are focusing on outflows, that is, they are trying to reposition portfolios instead of buying new stocks.
Any Idea About the Flops from 2021?
In 2021, the greatest IPOs had been proposed from e-commerce sectors, online services and technology, including Bumble Inc. (U.S. dating app), InPost SA and Hong Kong’s Kuaishou Technology. These entities that viewed increased demand in lockdowns lost their gains with the reopening of economies. 9 out of 10 largest IPOs of 2021 have been disappointing─ DiDi Global Inc. fell by 73%, and Rivian Automotive Inc. (Electric truckmaker) dropped 67% from peak after the sale of shares.
Is There Any Ray of Hope?
Some markets have been exceptions amidst turbulence. LG Energy Solution of South Korea pulled $10.7 billion in January with a 70% hike on Thursday, 27 January 2022. It has been the country’s largest offering. India is also looking forward to a record IPO─ LIC will soon issue its shares and is expected to raise a value worth $203 billion.
At present, IPOs are not on the priority list of fund managers. However, these offerings have the potential to bounce back once market fluctuations stop. In general, most firms are trying to find the right time to launch IPOs, keeping in mind selective investors.
Frequently Asked Questions
1. Who would have managed Four Springs Capital Trust IPO?
Underwriters guided by Goldman Sachs and Morgan Stanley would have managed the IPO of Four Springs Capital Trust. This entity offered eighteen million shares with a price range of $13 to $15.
2. What was the expected share price for Justworks Inc.?
Justworks Inc. of United States has expected to put forth 7 million shares with a price range of $29 to $32 apiece.
3. How many new shares did LG Energy offer?
LG Energy has offered 34 million new shares with a price range of 257,000 Won to 300,000 Won apiece.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.
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