The window for initial public offerings slammed shut in 2022, and experts are unwilling to bet on a swift reopening.
There were just 71 traditional IPOs or direct listings in 2022 that had market capitalizations of at least $50 million, compared with 397 in 2021, according to data from Renaissance Capital, a provider of pre-IPO research. The total number of issuances was the lowest level since 2009. “Typically, companies want to go public with their best foot forward,” he noted, meaning that they’ll be aiming to show “some level of inflection in their financial results.”It’s unlikely that the first quarter of 2023 will bring the sort of environment conducive to that performance, he said. Even if company executives deemed IPO market conditions to be warmer by April or May, “it would behoove them to kick the can down the road 90 days” if their first-quarter numbers were not up to snuff.
Don’t miss: Wall Street’s stock-market forecasts for 2022 were off by the widest margin since 2008 — will next year be any different? Would-be IPO candidates also consider recent returns as a gauge of market health, and the headline numbers weren’t exactly encouraging in 2022. The IPOs tracked by Renaissance averaged a negative-27% return on average from the offer price, making for the worst performance on that metric since 2008. The Renaissance IPO ETF IPO has declined 56.3% so far in 2022, while the S&P 500 index SPX has dropped 18.6%.
“Unit economics are not always popular, but they’re back in fashion,” Waas said. “It’s no longer growth at all costs.” Among names in the pipeline are Fogo Hospitality, parent company of the Fogo de Chao restaurant chain that went public in 2015 but was acquired in 2018; Savers Value Village, a thrift-store operator; and Bounty Minerals, an energy company, she said.