IPO Bankers Crave Stability After Boom Turned to Gloom This Year

After a record breaking year, the U.S. IPO market came back to earth with a thud in the first quarter. Now, bankers are praying for some stability to breath life back into the market.

Volatility from Russia’s invasion of Ukraine, faster inflation and rising interest rates triggered the slowest quarter of U.S. initial public offerings in more than five years. At one point, the market ground to a complete halt, with longest period without an initial public offering since the Great Recession.

In many ways, a downturn was inevitable. The market simply couldn’t maintain the pace of the year before as the rotation to value from growth forced many listing candidates to reconsider their plans and recent debuts extended a selloff.

“We were in a market of growth at all costs” last year, Wells Fargo & Co. co-head of equity capital markets Lear Beyer said. “People were just investing in anything that was growing. You needed some rationality to come into the market.”

Just 37 traditional IPOs priced during the first quarter, the least since early 2016. They raised $4.1 billion in total, a 94% slump from the same period last year. What’s more, over half of these stocks are now trading below their offering prices after investors accelerated a flight from risk during Russia’s invasion of Ukraine.

Alongside the drop in traditional listings, IPOs by new special purpose acquisition companies declined by 80% from the same period of last year.

Economic Cost

Shuttered access to equity capital markets has been a headwind for the broader economy, limiting firms from funding job creation, acquisitions and organic growth. The recent market recovery is providing hope that fundraising could accelerate in the months ahead, but bankers and analysts fear more turbulence ahead.