The IPO market froze in 2022

IPO Market

The window for IPO market slammed shut in 2022, and experts are unwilling to bet on a swift reopening. Following record-breaking deal activity in 2021 buoyed by special-purpose acquisition companies, or SPACs, and easy money, the 2022 market cooled in a big way.

The SPAC craze waned as the blank-check companies had difficulty finding suitable merger targets, while companies that considered traditional IPO debuts largely headed into hibernation.


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.

The decline in IPO market proceeds was even more staggering. Those 71 deals brought in just $7.7 billion in aggregate, 95% below the $142.4 billion seen in 2021, and the lowest level seen in more than three decades.

Those trends aren’t likely to change in the short term, experts say, after a perfect storm of surging inflation, rising rates and war in Ukraine ground the IPO market to a halt. It will take time for inflation and the rate environment to improve in a way that makes the IPO market more hospitable, and after that, companies would need to line up solid numbers and get their preparations in order.


For that reason, the first half of 2023 is likely to see “highly muted” IPO activity, according to Rohit Kulkarni, who covers tech companies as an analyst for MKM Partners.

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.

Then there’s the question of valuations in the tech sector, which have been hammered amid rising interest rates and broader concerns about the state of corporate spending. Once inflation and rates are better under control, the stock market has to recover some levels of valuations lost, said Previn Waas, the co-leader of the IPO Practice at Deloitte & Touche.

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Some portions of the tech industry are down anywhere from 60% to 80%, he noted. Executives and board members of private companies probably aren’t expecting a recovery back to peak levels soon, but they likely want to see some level of valuation fairness, such as a doubling of valuations from where they are currently.

Private companies would need to acknowledge that they need to reduce their valuation expectations, Kulkarni said. “The trigger for that would likely be mutual funds that hold stock in these private companies, which could start to report significantly lower valuations in their year-end reports.

But those reports tend to come on a 60-day lag, meaning the market wouldn’t get these signals until the middle of the first quarter.

“It’s a slow process for private markets to react to the new public norm of things,” Kulkarni said.

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