Global IPO Hits 14-Year Low Since Financial Crisis

Global IPO Volume Plummets 68%
US Sees Largest Drop at 93%

[Image source=AFP Yonhap News]

[Asia Economy Reporter Yujin Cho] The global initial public offering (IPO) market, which experienced an unprecedented boom last year, is expected to struggle to escape the downturn this year and next. The United States, which led the global IPO boom last year with SPAC (Special Purpose Acquisition Company) investments and meme culture, is sinking into an endless slump, while China is expected to show a strong rebound due to the easing of COVID-19 restrictions and the reopening of the economy, resulting in mixed fortunes across markets.

On the 18th (local time), Bloomberg reported that the global IPO market is facing the longest drought since the 2008 global financial crisis. The combined pressure of inflation and high interest rates caused by tightening policies from governments worldwide has made it difficult for the global IPO market to show signs of recovery. According to Bloomberg data, the global IPO volume this year is $207 billion, a sharp 68% drop compared to the previous year. This is the largest decline in 14 years since the 73% drop in 2008 when the global financial crisis was triggered by the Lehman Brothers collapse.

Last year, due to continuous monetary easing by governments worldwide in response to COVID-19, funds with nowhere else to go flooded the stock market, pushing the global IPO volume to a record high of $655 billion. In addition to traditional IPOs, companies entering the stock market through SPACs led the IPO boom, and individual investors enthusiastically drove the frenzy by investing in SPACs, which offered high capital gains.

However, as the COVID-19 pandemic ended and liquidity dried up, investor sentiment began to deteriorate rapidly. Moreover, the stock prices of companies listed through SPACs and others have plummeted sharply, deepening the IPO market slump. In the U.S. stock market last year, the stock prices of companies listed via SPACs have dropped 19% from their listing price to the present. Electric vehicle company Rivian, which gained great popularity as the "next Tesla," saw its stock price plunge nearly 70%.

In particular, the U.S. market, which enjoyed an unprecedented boom last year, experienced the largest decline. The IPO volume in the U.S. stock market this year was only $23.9 billion, marking the lowest level since 1990. This represents a 93% plunge compared to last year. Bloomberg diagnosed that the bursting of the SPAC bubble, which struck the U.S. economy last year, has pushed the once-booming U.S. IPO market into a slump.

The U.S. Federal Reserve (Fed) dismissed market expectations for a pivot by stating at the Federal Open Market Committee (FOMC) regular meeting on the 14th that it is "not considering rate cuts yet," lowering hopes for normalization of the IPO market, Bloomberg analyzed. Gareth McCartney, Global Co-Head of Equity Capital Markets (ECM) at UBS, said, "It is difficult to foresee a growth turnaround in the global IPO market next year."

On the other hand, China, which has resumed economic activities, and the Middle East, which has benefited from soaring energy prices, are expected to perform relatively well. This year, the IPO volume in the Chinese stock market reached $92 billion, and the Middle East accounted for $23 billion. Mandy Zhu, Head of China Market at UBS Group, said, "There is growing expectation that the market will rebound as the Chinese government eases regulations on the real estate sector and lifts high-intensity COVID-19 restrictions, moving toward reopening the economy."

This content was produced with the assistance of AI translation services.