Graphic: Tech IPO market faces worst year since global financial crisis

Lionsgate Studios

29/09/2022 10:50

By Gaurav Dogra and Patturaja  Murugaboopathy 
       Sept 29 (Reuters) - Initial public offerings by U.S.
tech companies have sunk to their lowest levels since the global
financial crisis of 2008, as stock market volatility, soaring
inflation, and interest rate hikes have soured investor
sentiment towards new listings. 
    According to Refinitiv data, only 14 tech companies have
floated their shares on stock exchanges so far this year,
compared with 12 in 2009. The IPOs this year have raised $507
million, the lowest amount that has been raised through
flotations since 2000. 
    Total IPO volumes fell 90.4% in the first nine months of
this year, compared with last year. 
    Analysts interviewed by Reuters said a steep drop in stock
market valuations has deterred tech firms from pursuing stock
market launches.
    The forward P/E (price-to-earnings) ratio of the S&P
Information Technology index was trading at 20.18 -- the lowest
level since April 2020. 
    "Institutional investors have been shifting capital
allocations while retail investors have been licking their
wounds," said James Gellert, chief executive officer at Rapid
Ratings.
    "This is a terrible backdrop for IPOs, in particular tech
IPOs, which rely on bull markets and momentum investors to
bolster their market entries."
    The Renaissance IPO index, which captures the largest and
most liquid U.S IPOs, has slumped 50.4% this year, compared with
the S&P 500 index's drop of 23%.
    Shares of Corebridge Financial Inc  CRBG.N , which launched
the largest IPO in the U.S. this year, were trading about 4%
below its offer price of $21 on Wednesday. 
    Rachel Gerring, Americas IPO leader at Ernst & Young, said
the poor after-market performance of 2021 IPOs has dampened
investor appetite for new stocks. 
    "Tech has been impacted in an outsized way by the
market-wide drop in valuations.  There was significant
fundraising throughout 2021 across the sector, providing tech
IPO-aspirants with the necessary capital to weather this
volatile time in the market," said Gerring. 
    Greek yogurt maker Chobani withdrew its plans for a U.S. IPO
earlier this month, while several other big names such as Reddit
and ServiceTitan have delayed their plans to go public this
year.  urn:newsml:reuters.com:*:nL4N30930N
    In the United States, sectors including financials and
healthcare were among the bright spots for IPOs, followed by
energy & power. 
    Jennifer Post, partner at Thompson Coburn, said energy
markets continue to be active due to disruptions in global
supply and distribution channels, while electric vehicle
adoption is also driving deals.
    "These areas should see IPO candidates in 2023 as the
urgency for capital investment will be more pressing and growing
commercial and consumer demand should remain strong," said Post.
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US tech IPOs total proceeds in first three quarters    https://tmsnrt.rs/3UHPkXr
S&P 500 information technology index's price to earnings    https://tmsnrt.rs/3dRFr8X
YTD performance of the Renaissance IPO index and S&P 500 index  
 https://tmsnrt.rs/3dNgTxY
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 (Reporting by Patturaja  Murugaboopathy and Gaurav Dogra in
Bengaluru; Editing by Anirban Sen, William Maclean)
 ((patturaja.murugaboopathy@thomsonreuters.com;))