It’s been a while since the market was so uninviting to companies waiting to go public. And the proof is evident: Almost 70 companies have withdrawn their IPO filings since the beginning of March, according to data from Stock Analysis. And on Wednesday, two more companies got cold feet—software firm Justworks and foot retailer Fresh Market both scuttled their IPO plans, according to CNBC.
Further data from FactSet shows that 1,073 companies went public in 2021, and only 92 did so during the first six months of 2022. If things were to continue at that pace, 2022 would see only 184 IPOs—a fall of almost 83% year-over-year. The number of global IPOs is down significantly this year, too. During the first half of the year, global IPO volumes were down 46% year-over-year, and proceeds were down 58%, per data from Ernst & Young.
The data from Stock Analysis shows that while there were only 42 withdrawn IPOs during 2021, there are already more than 100 so far in 2022. So while it’s not completely unusual for a company to withdraw its IPO filing, 2022 has seen more companies not following through on their stock listing plans. This is, in large part, due to worsening economic conditions, including high inflation, rising interest rates, and even the war in Ukraine, which has also led some companies to scrap their IPO plans, the Wall Street Journal reported earlier this year.
“Companies pursue IPO opportunities when the capital markets are more stable, predictable, and project upside. The current market is anything but that at the moment, and the market has no clear direction,” says Chuck Moritt, senior partner at consulting firm Mercer’s North America Multinational Client Group, the firm’s M&A arm.
As for how 2022 stacks up to a “normal” year for IPOs? Even with 2020 (555 IPOs in the U.S., per FactSet) and 2021 (1,073) being banner years for IPO activity, 2022 is shaping up to be the slowest since 2016. That year, only 134 companies went public, and prior to that, you’d have to go back to 2009 to find a slower year, when only 71 companies went public.
From FactSet’s data, and excluding the outlier years of 2020 and 2021, there was an average of 220 IPOs per year between 2019 and 2010. So, assuming that IPO activity continues at its current pace and there are a total of 184 IPOs this year, 2022 would still end up being a below-average year.
But even as some companies get cold feet, others are moving ahead with their plans. That includes some big names, such as Porsche and Instacart, both of which have not yet sent any indication that they plan to hold off on their IPOs. Last month, Grove Collaborative debuted on the New York Stock Exchange, and CEO Stuart Landesberg told Fast Company that he wasn’t worried about the short-term market conditions, but was more concerned with fulfilling the company’s long-term ambitions. “I’m totally jazzed about [going public], regardless of market conditions,” Landesberg said.
In terms of whether the IPO market will see a comeback during the second half of 2022, that doesn’t look likely, Moritt says, as investors and IPO sponsors are in a holding pattern.
“The inflationary environment and downward pressure on equities create more uncertainty for investors, limiting the desire to invest,” he says. “IPO sponsors are likely waiting for inflation to reduce and interest rates to stabilize. Right now, the market is very uncertain and volatile, which tends to limit IPO activity.”