Though the economy is still displaying some signs of strength with robust jobs report numbers and elevated levels of consumer spending, there are some notable, worrisome, and lingering trends in the entrepreneurial and startup space. Specifically, the number of companies that are going public, globally, continues to fall—a sign that, for investors and founders, we’ve definitely made an exit from the frothy pre-pandemic era.
The latest data confirms it: Global IPO volumes were down 8% during the first quarter of 2023, with proceeds down a whopping 61%, according to Ernst & Young’s (EY) Global IPO Trends Q1 2023 report.
There was a bright spot, though: In the Americas, IPO activity during Q1 2023 was up slightly year-over-year. So far this year, there were 40 IPOs versus 36 during Q1 2022, constituting an 11% change. Proceeds, too, were up 9%.
The activity in the Americas starkly contrasts with what’s happening in the rest of the world, where year-over-year IPO activity was down 6% in the Asia-Pacific region, and down 19% in Europe, the Middle East, India, and Africa (EMEIA). The report also finds that the number of companies using SPAC transactions to go public hit a six-year low.
“Amidst persistent macroeconomic and geopolitical uncertainty, exacerbated by stress in the global banking system, IPO windows are fleeting and funding conditions are getting tougher, with investors prioritizing value over growth,” said Paul Go, Global IPO Leader at EY, in a statement. “IPO-bound companies need to focus on building sustainable businesses with strong fundamentals to be well-positioned in a volatile environment and meet the challenges and opportunities of going public.”
The overall downtrend in IPO activity continues from the previous quarter when global IPO volumes were down 45%. Before 2022, it seemed that any and every company was finding ways to go public, but a shaky economy, rising prices, Russia’s invasion of Ukraine, and most recently, high-profile failures in the banking system are leading to many companies putting their IPO plans on ice.
It’s worth noting, too, that the end of the IPO frenzy last year may have less to do with overall economic conditions than meets the eye. As Fast Company has previously reported, there’s evidence that we’re in the midst of a larger change in the IPO space—one in which fewer companies go public, and more are actively being acquired by larger, established firms in an effort to snuff out would-be competitors. Think, for example, Meta (then, Facebook) purchasing Instagram.
Considering that there may be bigger trends at play, and a rough environment for companies looking to go public this year, the uptick in IPO activity in the Americas is likely somewhat of a surprise. But it may present another positive sign that the economy isn’t in such bad shape as some may think.
And there may be yet another uptick during Q2, when all is said and done, as inflation has seemingly peaked, and the Fed signals that it’s prepared to further slow, or potentially stop, interest rate increases this year. Though we likely won’t know that for sure until late June or July.
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