Analysis: Record IPO craze in 2021 worries investors

A sign is seen directing people to wear masks at the New York Stock Exchange (NYSE) in New York City
FILE PHOTO: A sign instructs people to wear face masks at the New York Stock Exchange (NYSE) as the Omicron coronavirus variant continues to spread in Manhattan, New York City, U.S., December 20, 2021. REUTERS / Andrew Kelly

December 24, 2021

By Echo Wang and Abhinav Ramnarayan

NEW YORK/LONDON (Reuters) – Initial public offerings (IPOs) around the world have raised a record $594 billion in 2021, outpacing the stock market rally, but often leaves investors disappointed in their subsequent stock performance.

Companies ranging from tech startups to white check buybacks flooded the market with offerings, taking advantage of investors’ willingness to bet speculatively when Low interest rates and the reopening of the economy thanks to a COVID-19 vaccine boosted their appetite for risk.

“It’s a capital market that is really exciting when you put it in the context of new issuance activity, and especially in terms of new issuance,” said Andrew Wetenhall, co-head of equity markets for the Americas at Morgan Stanley. establishment of new public companies.

Some bets have been successful. People who bought into the $1.2 billion IPO of lending startup Affirm Holdings Inc, backed by PayPal Holdings Inc, in January more than doubled their money, compared with the profit margin. 25% return in the S&P 500 index.

But many IPOs have gone awry. Shares of Swedish vegan dairy maker OFast Group AB, which raised $1.4 billion in its New York IPO in May, fell 53%, while shares of its food delivery app Deliveroo Plc, which raised £1.5 billion ($2.1 billion) when it listed in London in March, was down 46 percent.

The Renaissance IPO index, which tracks the average performance of newly listed US IPOs, is down about 8% on the year, compared with a 25% gain for the S&P 500.

Some bankers warn that the shares of some companies that listed their shares in 2021 are still trading at historically high valuations, even if they have succeeded after their IPOs. This is because many investors are willing to pay the most dollars to buy into these companies in their pre-IPO private funding rounds.

Paul Abrahimzadeh, co-head of North American equity markets at Citigroup Inc.

According to data provider Refinitiv, a total of 2,097 IPOs, excluding special purpose acquisitions (SPACs), have raised $402 billion by 2021 globally. That’s an 81% increase in proceeds and a 51% increase in the number of IPOs from 2020.

Including SPACs, which are shell companies that typically launch once they’ve attracted investors, IPO proceeds in 2021 hit $594 billion, according to data provider Dealogic.

The sectors driving the largest volume of IPOs are technology and healthcare. According to Refinitiv, there have been 426 tech IPOs launched this year and 332 healthcare-related deals, representing nearly 42% of the total proceeds from IPOs by companies globally.

Among the biggest offerings in 2021 is electric vehicle maker Rivian Automotive Inc, which raised more than $12 billion when it went to market in November, making it the largest US IPO since Alibaba Group Holding Ltd in 2014.

Other major players include Chinese online video company Kuaishou Technology, with proceeds of $5.4 billion, and South Korean e-commerce giant Coupang Inc, with proceeds of $4.6 billion. la.

James Fleming, global co-head of equity markets at Citigroup Inc.


According to Refinitiv, SPACs, which go public mainly in New York, have raised a total of about $160 billion this year, representing 28% of all proceeds from US IPOs.

They had a rollercoaster ride when investors’ enthusiasm for them at the start of the year turned to disappointment over poor returns.

The main SPAC exchange-traded fund, the Defiance Next Gen SPAC Derived ETF, is down 25% year-to-date after peaking in February.[L4N2N13S5]

“The peak rate of activity (SPAC) has never been sustainable and now the market is consolidating. But SPAC is not going away,” said Eddie Molloy, co-head of equity markets in the Americas at Morgan Stanley.

The IPO roadmap for the first quarter of 2022 is strong, with social media platform Reddit, transportation technology startup Via, software maker Cohesity and private equity firm TPG already out. Apply to the regulatory authorities to be listed.

However, investment bankers say that the recent rather warm financial performance of many IPOs means this year’s prosperity is unlikely to repeat in 2022, especially if the stock market loses ground. because of inflation and other economic concerns.

There are also regulatory risks. The US Securities and Exchange Commission has blocked New York listings of Chinese companies, demanding more disclosure. Ride-hailing giant Didi Global Inc, which completed a $4.4 billion IPO in New York in June, has said it will move its listing to Hong Kong, as China pushes more of its companies. I listed stocks closer to home.

“I have to think (2022) is going to be a down year in terms of global release,” says Fleming.

(Reporting by Echo Wang in New York and Abhinav Ramnarayan in London; Editing by Greg Roumeliotis and Dan Grebler) Analysis: Record IPO craze in 2021 worries investors

Bobby Allyn

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