Initial public offerings (IPOs) had a blockbuster year for listings on the US stock exchanges in 2021 and it was expected to continue in 2022. However, activity has dropped dramatically in the first eight months of 2022, finds GlobalData.

According to the leading data and analytics company’s Deals Database, there were 1,233 IPO listings registered with an aggregate deal value of $95.4 billion in the first eight months of 2022 on the US stock exchanges. Comparing this to the 2,576 listings with a deal value of $491.5 billion in the corresponding period in 2021, there is a sharp decrease of around 52% in listings and 80.6% in value.

Murthy Grandhi, Company Profiles Analyst at GlobalData, comments: “One of the main contributing factors for this sharp decline was an abrupt downshift in the number of IPOs by Special Purpose Acquisition Companies (SPACs). This was due to the high profit booking by initial SPAC IPO investors following merger announcements, which led to a sharp decline in stock prices. This resulted in reduced funding for newly established entities, which has created a more difficult environment for SPACs wanting to meet their acquisition targets.”

Another factor that negatively impacted the IPO market was a weak US stock market in the first half of the year due to the soaring global inflation, which also forced the US Federal Reserve to aggressively hike interest rates. Additionally, the increased scrutiny around Chinese companies that were planning to go public on the US stock exchanges, driven by tightened disclosure requirements, resulted in companies pulling back. This may cause an exodus of Chinese companies from the US stock markets.”

Sectors topping the IPO charts were technology, media & telecom with 246 deals worth $11.9 billion, followed by financial services (164 deals with a value of $21.2 billion), pharmaceuticals and healthcare (139 deals, $9.6 billion), and industrial goods and machinery (116 deals, $2.6 billion).

Grandhi concludes: “As SPAC activity has dropped, interest rates have spiked, stock markets have fallen, and regulations have become stringent, IPO activity appears to have dried up in 2022 so far. As a result of these changes, it’s unlikely that the IPO market will recover in 2023.”