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  • Energy companies have suffered the biggest losses since their IPO – the median share value was just 71.77% of their IPO value – and the report shows they do not hold the better long-term opportunities for investors.
  • The report found that real estate had the highest market capitalization in the UK and Hong Kong markets, and there are huge opportunities for investors in this sector looking to expand their portfolios.

February 2022– London: IPOs are an exciting prospect for investors, as high-potential companies are key to any investment strategy or as an attribute of a portfolio. However, the turbulent stock market means investors need to be very aware of where IPOs are being launched and where they are likely to perform best to avoid a disappointing return.

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Despite high inflation, the accumulation of venture capital-backed start-ups over the past decade means that there are still plenty of opportunities ahead for 2022.

A new report from IG Prime, a provider of institutional trading solutions and prime brokerage, has revealed which sectors have performed the best after IPOs and how this is reflected in the areas investors should look to invest in. in the future.

IG Prime looked at companies listed on the Nasdaq and NYSE in the US – as well as the London Stock Exchange in the UK and the Hong Kong Stock Exchange – and compared IPO performance across industries , over time since launch, and company location.

Key takeaways for investors

In the US and UK markets, stocks that have gained in value over the long term have often suffered in the short term, suggesting that investors need to be consistent and patient to see a return.

With US and UK stock markets showing declining value for the energy sector, it appears investors may want to remain cautious when considering energy IPO options.

Property had the highest market capitalization in the UK market and Chinese property in Hong Kong – while not necessarily the best investment for stock value, there is certainly a profitable return in this market and the opportunity to explore how these could contribute positively to a portfolio.

Research indicates that over the long term, companies are more likely to experience steady growth from IPOs because those that have gone public in the past are now worth more than their original stock price.

Chinese regulations

Recent tensions from US and Chinese regulators have meant the market is shifting from Chinese influence to US exchange interest in Southeast Asian markets. With the risk of interference from Chinese and US regulators, Chinese listings have become rarer – but the Nasdaq remains bullish, viewing the entire region as “ripe for IPO activity”. However, time will tell if the most recent years reflect US and Chinese differences in fund performance.

PSPC

The SPAC (Special Purpose Acquisition Company) recently exploded with deals in 2021, in the US jumping 6.5%. But there are concerns about the duration of this decision, as investors rush to bid. The analysis also showed that it is not a sustainable investment for growth, and almost universally registers negative returns. Currently, SPACs don’t appear to be slowing the pace of IPOs, but rather there is rapid investment in both.

Upcoming IPOs

This year, US digital banking firm Chime and vegan “meat” Impossible were valued at $25 billion and $4 billion according to Forbes, meaning investors should watch out for IPOs in this space.

Burger King, Zopa and Monzo have also floated the idea of ​​an IPO sometime in 2022 following the relaxation of listing rules by the Financial Conduct Authority.

IPOs in the United States

As of January 24, 2022, 363 future IPOs are listed for the US market, with nearly 5 billion shares in total registered to be offered. Typically, these companies have grown since their IPO, which was reflected in their median share price, which was 102.61% of the value they had when they launched. initial.

The fastest growing sector across the NYSE and Nasdaq was the broad area of ​​basic industries – this covers the discovery, development and trading of raw materials used in other industries. Share prices were at a median of 160.38% of their original value. This compared to the sector that suffered the most, energy, including coal mining and consumer electronics, in which the median value of shares was only 71.77% of their IPO value. in stock exchange.

The best performing state listed on US stock exchanges for companies since the IPO was Vermont, USA, where the median value of company stocks was 483.83% of their value at IPO. This was followed by Iowa, USA, where the stock value was 358.72% of their IPO value.

IPOs in London

Companies listed on the London Stock Exchange posted slightly better returns overall than their counterparts in the United States, with median share prices at 104.73% of their IPO value.

In January 2022, there were six new listings on the LSE. The median number of companies organized per year since 2000 is 2.5, indicating that there has been an influx of IPOs into the LSE in recent years.

The sector with the biggest increase in share value since IPO was industrials – companies in this sector posted a median of 146.69% of the value they held when they returned. public. However, real estate had the highest market capitalization on the exchange with a median of £408.83 million.

Similarly, as in the United States, the sector that suffered the most was energy with a median of only 10.34% of its IPO value.

UK-launched companies achieved only third place overall for highest median share price as a percentage of initial IPO share price. The first option was instead Cyprus, which has seen a median of 160.32% in value since its IPO.

IPOs in Hong Kong

Hong Kong results reflect short-term performance. Either way, median stock prices were significantly lower than they were at the IPO, with stocks representing only 68.29% of value at IPO. This indicates that Hong Kong-listed companies have experienced significant underperformance recently.

The energy sector proved to be the most successful IPO sector in Hong Kong – shares averaged 238.57% of their original value.

The highest market cap, which is also reflected in the UK results, was in Chinese real estate, with a median of HKD 6,753,350,000.

The worst performing sector overall was engineering, where shares stood at a median of just 30.89% of the value they had at the time of the IPO.


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