The downturn in the stock market since the beginning of the year has resulted in the most persistent US tech listings drought in a century. Experts are concerned about its pace towards revival, even following tentative restoration signs in other sectors. Generally, Wednesday marked the 238th day without any tech IPO worth over $50mn. The current downturn surpasses the previous records in the aftermath of the early 2000s dotcom crash and the 2008 financial crisis.
The Federal Reserve has rocked the US stock market this year through the battle to lower inflation by imposing aggressive interest rate hikes. These higher borrowing costs have hit the stock valuations and reduced future earnings value. Hence, it has spiked concerns that the world economy might crumble into a recession. In any case, high-growth technology stocks dominated the record-breaking IPO capital markets last year.
Stocks leveraged some significant gains during the previous stock market boom, although they are now disappointedly hit by the current sell-off. The Renaissance IPO index that tracks all US companies listed in the previous two years has fallen by over 45%, the S&P 500 has dropped by over 19%, and the Nasdaq Composite (tech-dominated) decreased by 28%. Last week life insurer Corebridge finalized its first $1 billion US IPO this year.
The transaction featured a cautious early reception highlighting investors’ concerns even for the most profitable and well-established businesses. Inclusive of the Corbridge transaction, the US IPO volumes dropped by 94% year-on-year, with about $7 billion in collections in 2022. This value compares to an overall $11 billion over the same duration in 2021. Experts have watched the Corebridge transaction as a sign of stakeholders’ enthusiasm for transactions.
On the other hand, IT groups in the S&P 500 have just attained the second quarter estimates. However, forecasts for the third quarter are repeatedly lower, and earnings might drop to 4% year-on-year. Most tech companies are responding to the current stock market downturn by emphasizing lower costs and improving conversions. Yet, these companies might take a little more time to showcase progress.
There has been a profitability discussion among IPO candidates since last year. Nonetheless, it might take more time to showcase any substantial progress for group candidates than for individual candidates. Tech firms raising enough capital before the current drought might make the stock market downturn last longer. In other words, these companies do not have the same urgency. Experts believe that most tech companies will strive to list their stocks this year, but most have plans for 2023.
