IPOs in Americas plummet 72% during first quarter: EY

Dive Brief:

  • Initial public offerings (IPOs) in the Americas plummeted 72% during the first quarter compared with the same period last year, with total proceeds imploding 95% to just $2.4 billion, EY said.
  • “This year continues to test the resiliency and agility of companies looking to go public,” EY Americas IPO Leader Rachel Gerring said, citing market volatility, “geopolitical crises” and rising inflation, including surging oil prices.
  • The number of IPOs worldwide shrunk 37% and proceeds slumped 51% during the first three months of 2022 compared with the same period last year, even after generating the highest proceeds during any January in 21 years, EY said. Companies raised $5.4 billion in 321 deals.

Dive Insight:

Many CFOs have shelved plans to take companies public in the face of several risks, including stock market volatility and concerns about COVID-19, according to EY Global IPO Leader Paul Go. In addition, restrictions on Russia’s trade and finance announced after its invasion of Ukraine have stoked inflation in the U.S., Europe and several developing economies.

In the U.S., inflation running at a four decade high prompted the Federal Reserve last month to raise the benchmark interest rate a quarter point in its first policy tightening since 2018.

The Fed provided record stimulus in early 2020 to support financial markets and revive the economy from a pandemic-induced downturn. Stock markets this year have seesawed — and discouraged IPOs — partly in reaction to the withdrawal of Fed accommodation.

“As many uncertainties remain, the market will remain volatile with a backlog of IPO candidates and pipelines will continue to build up,” Go said. “There is a risk that IPO activity will continue to slow further.”

The array of risks has also jolted deal-making. The total value of worldwide mergers and acquisitions slumped 23% to $1 trillion during the first quarter compared with the same period last year, according to Refinitiv.

Until this year, the food and beverage category has seen several companies go public, several through a merger with a special purpose acquisition corporation, or SPAC. Companies that have gone public during the last two years include Dole, Noosa-maker Sovos Brands, chips company Utz Quality Foods and coconut water producer Vita Coco. All of them, with the exception of Sovos, are trading below their listing price.

“The fact that they [have] fallen below their IPO price doesn’t mean that they’re bad companies. It just means that they were overpriced companies,” Erik Gordon, a business professor at the University of Michigan, speaking of food and beverage listings as a whole, said last November. “And the fact that they’re overpriced companies is not related to them being food companies, it’s related to when they went public. They went public during a frothy market.”

Traditional U.S.-listed IPOs, excluding SPACs, in 2021 were valued through Oct. 27 at $261 billion, according to data provided by Dealogic that goes back to 1995. The total easily surpasses other full years tabulated by the firm. In food and beverages, the deals have been valued at more than $3 billion, the second highest on record during the same period.

Coming into 2022, there was optimism that more IPOs were in the works in food and beverages, including from a pair of high-profile companies. But the sector has been largely quiet when it comes to new listings.

Chobani recently announced the departure of top executives and delayed its long-awaited IPO, citing a volatile market. Plant-based meat company Impossible Foods has been exploring the possibility of listing its shares for some time, but a slowdown in the category and the company’s recent hire of a new CEO may have delayed such a move for the foreseeable future.