Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Analysis: Record IPO binge in 2021 leaves investors hung over

EconomyDec 24, 2021 12:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Signage is seen directing 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

By Echo Wang and Abhinav Ramnarayan

NEW YORK/LONDON (Reuters) - Initial public offerings (IPOs) around the world raised a record $594 billion in 2021, riding the coattails of stock market rallies, yet often disappointing investors with their subsequent stock performance.

Companies ranging from technology start-ups to blank-check acquisition firms flooded the market with offerings, capitalizing on investors' willingness to place speculative bets as low interest rates and the re-opening of economies thanks to COVID-19 vaccines fueled their appetite for risk.

"It was a truly euphoric capital market when you put it in the context of new issuance activity, and in particular in the creation of new public companies," said Andrew Wetenhall, co-head of equity capital markets in the Americas at Morgan Stanley (NYSE:MS).

Some of those bets worked out. Those who bought into the $$1.2 billion IPO of lending start-up Affirm Holdings Inc, backed by PayPal Holdings Inc (NASDAQ:PYPL), in January have more than doubled their money, versus a 25% return in the S&P 500 index.

But many IPOs soured. Shares of Swedish vegan milk maker Oatly Group (NASDAQ:OTLY) AB, which raised $1.4 billion in its IPO in New York in May, are down 53%, while those of British food delivery app Deliveroo Plc, which raised 1.5 billion pounds ($2.1 billion) when it listed in London in March, are down 46%.

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

Some bankers cautioned that shares of some of the companies that went public in 2021 are still trading at historically high valuations, even if they took a hit after their IPO. This is because many investors were willing to pay top dollar to buy into these companies in private fundraising rounds in the run-up to their IPOs.

"The issue is that buyers of these IPOs as well as after-market buyers are marking losses," said Paul Abrahimzadeh, co-head of North America equity capital markets at Citigroup Inc (NYSE:C).

A total 2,097 IPOs, excluding those of special purpose acquisition companies (SPACs), raised $402 billion in 2021 globally, according to data provider Refinitiv. That was an 81% increase in proceeds and a 51% rise in the number of IPOs from 2020.

Including SPACs, which are shell companies that typically launch when they have lined up investors, IPO proceeds in 2021 reached $594 billion, according to data vendor Dealogic.

The biggest sectors driving IPO volumes were technology and healthcare. There were 426 technology IPOs launched this year and 332 healthcare-related deals, collectively accounting for almost 42% of IPO proceeds raised by companies globally, according to Refinitiv.

Among the biggest offerings in 2021 was electric-vehicle maker Rivian Automotive Inc, which raised over $12 billion in its market debut in November, making it the largest U.S. IPO since Alibaba (NYSE:BABA) Group Holding Ltd in 2014.

Other major ones included Chinese online video company Kuaishou Technology, with $5.4 billion in proceeds, and Korean e-commerce giant Coupang Inc, which raised $4.6 billion.

"It has been an extraordinary year for equity formation globally - dare I say one that is unlikely to be repeated any time soon," said James Fleming, global co-head of equity capital markets at Citigroup Inc.

SPACS RETREAT

SPACs, which went public mostly in New York, raised a total of about $160 billion this year, accounting for 28% of the total proceeds raised by U.S. IPOs, according to Refinitiv.

They had a roller-coaster ride as investor enthusiasm for them at the beginning of the year turned to disappointment because of their poor returns.

The main SPAC exchange-traded fund, the Defiance Next Gen SPAC Derived ETF, has shed 25% of its value year-to-date after peaking in February.[L4N2N13S5]

"The peak pace of (SPACs) activity was never sustainable and now the market is consolidating. But SPACs are not going away," said Eddie Molloy, co-head of equity capital markets in the Americas at Morgan Stanley.

The IPO pipeline for the first quarter of 2022 is strong, with social media platform Reddit, transportation tech start-up Via, software maker Cohesity and private equity firm TPG having filed with regulators to go public.

Still, investment bankers say the recent lukewarm financial performance of many IPOs means that this year's bonanza is unlikely to be repeated in 2022, especially if stock markets lose some steam because of inflation and other economic concerns.

There is also regulatory risk. The U.S. Securities and Exchange Commission has cracked down on the New York listings of Chinese firms, requiring more disclosures. Ride-hailing giant Didi Global Inc, which completed its $4.4 billion IPO in New York in June, has said it will move its listing to Hong Kong, as China pushes many of its companies to go public closer to home.

"I have to think (2022) will be a down year on global issuance levels," Fleming said.

Analysis: Record IPO binge in 2021 leaves investors hung over
 

Related Articles

Climate change is hurting insurers - report
Climate change is hurting insurers - report By Reuters - May 17, 2022 1

LONDON (Reuters) - Climate change is hurting the insurance industry and only 8% of insurers are preparing adequately for its impact, consultants Capgemini and financial industry...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Hasin Sajid
Hasin Sajid Dec 24, 2021 1:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
03064320498*4567#
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email