CHALLENGING ENVIRONMENT :
Interest rate hikes, slowing growth and geopolitical tensions put global equities on track for their worst month since the start of the pandemic
Initial public offerings (IPOs) had a difficult start to the year.
Globally, IPOs worth $26.7 billion were completed, down 60% from the same period a year earlier. Today, the agreements concluded are piling up under the pressure of the turbulent markets.
The prospect of interest rate hikes combined with slowing economic growth and geopolitical tensions put global equities on track for their worst month since the start of the pandemic. Foamier tech and growth stocks, including recent IPOs, have been particularly vulnerable to selling as investors flock to cheaper stocks.
“It’s a very difficult environment for new listings at the moment,” said Andreas Bernstorff, head of European equity markets at BNP Paribas SA. “Many investors are grappling with their portfolios turning negative and the spin-to-value reducing appetite for the growth stocks that dominated the IPO market last year.”
In New York, market turmoil prompted at least nine companies to cancel their IPOs, including cloud-based human resources platform Justworks Inc and Four Springs Capital Trust. And the blank check frenzy that peaked early last year has reversed, with US$4 billion worth of special purpose acquisition company listings removed this month.
In Europe, start-up WeTransfer withdrew its Amsterdam bid on Thursday after failing to generate enough investor demand, and a day later German drugmaker Cheplapharm Arzneimittel GmbH suspended its planned listing. British law firm Mishcon de Reya LLP has delayed what would have been the world’s largest law firm for the second time, Bloomberg News reported.
Lower investor demand and tough markets have caused the value of canceled IPOs globally to nearly double from a year ago, reaching US$6.2 billion so far. Another recent casualty was South Korea’s Hyundai Engineering Co, which pulled its $1 billion listing on Friday after failing to attract demand at the valuation it wanted.
“While the sale removes some of the scum from the market and will likely create plenty of opportunity in long-term growth stocks, it would be a brave move for a company to push for an IPO in the current climate.” , Allianz Global Investors said Virginie Maisonneuve, global chief investment officer for equities.
In Hong Kong, Asia’s busiest listing venue, revenue has fallen more than 40% this year as China’s sweeping regulatory crackdown forced companies to halt plans to go public.
Fund managers “have started to see outflows, which means they are more focused on repositioning their portfolio rather than buying new issues,” said the global head of Berenberg’s equity syndicate. , Fabian DeSmet. “IPOs quickly moved from the top to the bottom of their priority list.”
However, some markets seem to have escaped the turmoil. South Korea’s LG Energy Solution raised $10.7 billion in the country’s biggest-ever IPO and soared nearly 70% on its Thursday debut last week.
India is also gearing up for a record listing: state insurer Life Insurance Corp of India is set to go public soon in a deal that could value it at up to $203 billion, Bloomberg News reported.
And IPO markets could rebound quickly if market swings ease. If listing candidates are aware of investors’ price caution, this year could get off to a rocky start.
“In general, most companies are still moving forward with their IPO plans and may find a window to launch,” said Shi Qi, head of equity market at China International Capital Corp (中國國際金融). “As long as the issuer’s valuation expectation is in line with market conditions, I think there’s always demand for an IPO.”
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