SVB Crisis Freezes US IPO Market... 19% of China's Fundraising Amount

The banking crisis triggered by Silicon Valley Bank (SVB) in the United States is casting a chill over the U.S. initial public offering (IPO) market. Chinese companies, which had somewhat avoided the global banking crisis, have raised five times more funds through IPOs than the U.S.

[Image source=Reuters Yonhap News]

원본보기 아이콘

According to financial information firm Dealogic on the 1st (local time), 56 companies raised $3.8 billion (approximately 5.1 trillion won) through IPOs in the U.S. stock market from January to April this year.

This represents a 69% decrease compared to $12.3 billion (approximately 16.5 trillion won) raised through IPOs by U.S. companies during the same period last year. Compared to the booming stock market year of 2021, when $130 billion (approximately 174.5 trillion won) was raised, the market has shrunk drastically.

The European IPO market also raised only ?1.8 billion (approximately 3 trillion won) in the first four months of this year, a 40% decrease compared to the same period last year. However, the decline in investment inflows was less severe than in the U.S.

Compared to China, the sluggishness of the U.S. IPO market is even more pronounced. In China, 80 companies have raised $19.5 billion (approximately 26.2 trillion won) through IPOs this year. Chinese companies have attracted five times more funds than the U.S. this year, absorbing 53% of the total investment inflows into the global IPO market.

Although companies worldwide raised $4 billion (approximately 5.4 trillion won) less than a year ago due to the global stock market downturn, the impact was limited thanks to the Chinese financial authorities' easing of listing requirements.

[Image source=Reuters Yonhap News]

원본보기 아이콘

The causes of the relatively frozen U.S. IPO market include the Federal Reserve's (Fed) aggressive tightening, high inflation, and the banking crisis. At the beginning of the year, there were expectations that the rising U.S. stock market would warm up the IPO market. However, the mood reversed after SVB's collapse in March and the subsequent chain collapse of regional banks. Increased stock market volatility and growing recession concerns led to a contraction in investor sentiment.

Seth Rubin, Head of U.S. Equities and Capital Markets at Stifel, a comprehensive U.S. financial company, analyzed, "There will be some (IPO) activity, but the idea of a quick rebound in the U.S. IPO market has come and gone." He explained, "Investors have started to show interest in IPO candidates, but companies already listed are trading at prices significantly discounted compared to previous valuations. Considering this, investors are not rushing into the IPO market."

A U.S. banker said, "Recent gains in several large-cap stocks are supporting the overall market," adding, "Investors have almost no desire to buy small and risky companies." He continued, "The world is still chaotic," and noted, "The S&P has fallen 13-14% from its peak, but hardly anyone feels it has only dropped 14%."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.