How Have IPOs Performed So Far In 2022?

Key takeaways

• 2020 and 2021 were breakout years for IPOs, but 2022 shows low volume even excluding that 24 month period.
• In spite of low volume there are still IPO opportunities (see list below)
• Generally, young companies will be reticent to move forward with an IPO during periods of economic volatility.

As an investor, it’s always interesting to hear about a new IPO that’s about to hit the market. You start to consider the upside as the buzz builds and the valuation takes shape.

Interest inevitably starts to build in the market for a business that is fundamentally strong with a clearly defined competitive advantage. A part of you doesn’t want to miss out, you find yourself using terms like ground floor, while another part of you is skeptical about the risks involved with buying in so early, because – after all – there’s just no telling how the market will react.

With the economic downturn we’ve experienced in 2022, IPOs have become an even riskier proposition because market uncertainty, for a company going public, is like a cold bath on a winter morning.

We’ve gone into detail about how an IPO works for those interested in learning more about the topic. Let’s look at how IPOs have performed so far in 2022.

How do the 2022 IPOs compare to recent history?

When looking at the performance of IPOs in 2022, we have to compare them to previous years. 2020 and 2021 showed surges of IPO activity, inspired by offerings from SPACs and blank check companies. Unfortunately, SPACs (more on them later) have come under increased scrutiny by the SEC, discouraging new entrants from the market.

Number and Size of IPOs

While Q1 of 2021 saw 395 initial public offerings raise $140 billion, Q1 of 2022 saw 77 IPOs raise $12.2 billion. If you want to zoom out, the numbers behind IPOs are even more concerning. In 2021, a total of 1,073 companies went public, raising $317 billion. In the first half of this year, the market saw a total of 92 companies raise just shy of $9 billion. The simplest calculations allow us to project 184 public offerings by the end of the year. Removing the outstanding IPO quantity of the last two years, the average number of IPOs in a given year throughout the twenty-teens was 220.

A recent update here made it clear that IPOs have collapsed due to the economic downturn and instability in the markets. As you can tell, fewer IPOs are coming to the market in 2022, and less money is generally allocated.

Why’s this happening? Why are IPOs struggling in 2022?

Aside from the obvious market volatility that has impacted all companies, there was a drop in the number of IPOs coming from SPACs (Special Purpose Acquisition Companies), and the rate hikes from the central banks led to a market spiral. The economic downturn led to panic selling as we saw many companies with strong fundamentals decrease in value. This has also led to speculation about a potential recession leading to an extended bear market.

With so much uncertainty in the market, many companies aren’t rushing to go public for funding either, since a poorly timed IPO could cost the business millions of dollars in potential funding – a successful IPO can cement a company’s future for years to come, but an unsuccessful IPO can leave that same company hanging in the wind. In short, timing and perception matter.

On the investor side, people are less enthusiastic about new companies going public when there are unfavorable (or just uncertain) macroeconomic conditions. Many investors are hesitant to take risks with IPOs since they may have seen their net worth drop significantly in 2022.

What are some of the most successful IPOs of 2022 so far?

TPG Inc. (TPG)

The private equity firm went public in early 2022, raising $1.1 billion at a valuation of $9.1 billion. Most of the contemporaries of this company went public about a decade earlier, so this IPO was a long time in the making.

TPG opened on January 13, 2022, at $33.00 and closed the day at $34.00. The current price is $32.88.

Bausch + Lomb Corporation (BLCO)

The contact lens and eye care company went public in May of 2022. They raised $630 million, giving the company a market value of $6.67 billion.

BLCO opened on May 6, 2022, at $18.50 and closed the day at $20.00. The current price is $16.75.

Excelerate Energy, Inc. (EE)

This LNG company based out of The Woodlands, Texas went public in April. They raised $384 million, which brought the total valuation to $2.4 billion.

EE opened on April 13 at $28.20, then closed the day at $26.85. The current price is $25.32.

Screaming Eagle Acquisition Corp. (SCRM)

Screaming Eagle is a blank check company that supports mergers, share exchanges, asset acquisitions, and other related business transactions. They were able to raise $750 million at the start of 2022.

SCRM opened on March 1 at $9.70 and then closed the day at $9.70. The current price is $9.64.

ProFrac Holding Corp. (PFHC)

This Texas-based company provides hydraulic fracturing and completion services to North America’s upstream exploration and production projects. They were able to raise $441.6 million with the IPO in May.

PFHC opened on May 13 at $17.60 and then closed the day at $18.11. The current price is $19.62.

As you can tell, some huge IPOs still hit the market in 2022, but they were few and far between. It’s also important to note that the finance sector took the lead again with IPOs in 2022, and the health technology sector was a close second.

What can we expect from IPOs in the near future?

It’s no secret that fast-growing companies are taking the time to review growth plans and reconsider funding options. Companies that would’ve already gone public with an IPO are holding back to see how the economic downtown plays out.

There’s a higher skepticism about IPO timing since there’s no telling what macroeconomic factors will play a role when the big day arrives.

Alas, there are still some IPOs to watch out for, with many months remaining in 2022. We looked through some companies to see which IPOs you need to be looking out for.

IPOs to keep an eye on

• Stripe: This payment processor could make for one of the biggest IPOs of all time. Stripe was able to prosper as the world turned to online shopping. The company hopes to go public to develop new businesses, such as small business loans, banking services, and other financial services.
• Discord: This has become the messaging platform for the video games community. The company currently has a valuation of $15 billion, and they boldly turned down a $12 billion buyout in 2021, so expectations are high.
• Instacart: This is one business that exploded during the pandemic. They just announced a profitable second quarter for 2022 and have recently valued the company at $24 billion.
• Reddit: This is one of the most popular websites and apps for discussion boards. It will be interesting to see how the stock market reacts to a company that has significantly influenced the stock market of late.
• VinFast: This electric vehicle company based in Vietnam is looking to start delivering SUVs to North America and Europe by the end of 2022. With plans to open a factory stateside in 2024, the company hopes to raise as much as $3 billion from an IPO.
• Mobileye: This company has already been public and is looking to return to the stock market. The CEO has gone on record to state that a lack of stability and high volatility are holding them back from another IPO.

What you should know about investing In IPOs

While investing in a company at the IPO stage can come with potential rewards, certain risks cannot be ignored. When you buy into a newly public company, you have to factor in that it’s not completely known how the market will react to the financials, let alone public scrutiny. Regulatory filings, which occur at least three months prior to the initial public offering require unprecedented levels of scrutiny for a young company from the lead investment banker, lawyers, accountants, SEC experts, and others assembled to hash out the details of the S-1 registration statement with the SEC.

Three quick tips if you’re considering investing in an IPO

1. Dig around for objective research on the company.
2. Choose only companies with strong underwriters.
3. Read the full prospectus.

Still, it’s essential to remember that there’s still so much information that can’t be discovered about a private company, so you will want to be cautious with how much money you invest in an IPO.

There is a lot to consider before purchasing shares during an IPO, including how such an investment shifts the balance of one’s overall portfolio. In this context, it is important to consider your overall investment strategy. You can download Q.ai today for access to AI-powered investment strategies.