IPO Market Slows Down in First Quarter | Chief Investment Officer

Just 18 companies went public in the U.S. this quarter, a dramatic drop from the 84 companies in the fourth quarter of 2021. Not only were there fewer deals, but the size of the deals also shrunk.

“Just 18 IPOs raised $2 billion,” said Matt Kennedy the vice president of data and content at Renaissance Capital in a video on its website. “That is the slowest quarter for IPOs in six years.”

Two billion dollars is a whopping 95% drop when compared to capital raised by IPOs this time last year. However, 2021’s Q1 numbers are significantly above the average first quarter numbers over the past 10 years, which hovered under the $10 billion mark.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

According to Renaissance Capital, the median deal size for IPOs this quarter was just $27 million, a 78% drop from 2021’s fourth quarter $125 million average deal size.

Global IPOs also had a rough quarter, which saw just 321 total deals, according to EY. This was a 37% drop compared to last year’s global first quarter numbers. The value of the deals dropped even more significantly. IPOs raised just $54.4 billion in proceeds, a 51% drop on a year-over-year basis.

Paul Go, the global IPO leader at EY, warned that IPOs may continue to slow down for the foreseeable future.

“While markets continue to be volatile, and uncertainties on economic recovery remain for reasons including continuing concerns around COVID-19, there is a risk that IPO activity will continue to slow further with IPO candidates choosing to postpone their transactions,” Go said in a press release.

For institutional investors heavily invested in private equity, if this trend in poor IPO performance continues, it could decrease returns in the asset class. Additionally, with the SEC now targeting special purpose acquisition companies, or SPACs, and increasing regulations, there could be even fewer opportunities for firms to go public in the upcoming year.