U.S. tech IPO market suffers its worst year – plummets 90.4%

U.S. tech IPO

The initial public offerings (IPOs) of US technology companies fell to very low levels. In fact, the current level is the lowest since the 2008 global financial crisis. The stock market volatility, soaring inflation and interest rate hikes kept investors apprehensive especially toward newly listed companies. Data released by Refinitiv shows that so far this year, only 14 tech companies have successfully listed on the stock exchange, up from 12 in 2009. This year’s tech IPO raised $507 million, the smallest amount raised through a stock offering since 2000. The total number of IPOs in the first nine months of this year plunged 90.4% compared to last year.

U.S. tech IPO

Analysts claim that the sharp decline in stock market conditions is discouraging technology companies from pursuing IPOs. The current forward price-to-earnings ratio for the S&P Information Technology Index is 20.18, the lowest since April 2020.

James Gellert, CEO of Rapid Ratings, said… “Institutional investors have been shifting capital allocations while retail investors have been licking their wounds. This is a dire backdrop for an IPO, Tech IPOs in particular need to rely on a bull market. They also have to rely on aggressive investors to prop up their listings.”

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Massive IPos drop in the U.S.

The IPO Revival Index, a document that records the largest and most liquid IPOs in the U.S., has fallen 50.4% this year, compared with the S&P 500’s 23% decline. Shares of Corebridge Financial Inc, the largest U.S. IPO this year, traded about 4 per cent below its $21 offering price on Wednesday.

Rachel Gerring, Ernst & Young’s head of IPOs in the Americas, said poor market performance after IPOs in 2021 has dampened investor appetite for new stocks. He said… “The U.S. tech industry has been greatly affected by the decline in the market value of the entire market. Throughout 2021, there has been a large number of fundraising activities across the industry. This provides the funds for IPO applicants in the technology industry, to get through this turbulent time in the market.”

Greek yogurt maker, Chobani cancelled plans to go public in the U.S. earlier this month. Several other big names, including Reddit and ServiceTitan, have delayed plans to go public this year. In the U.S., industries including finance and healthcare are among the main battlegrounds for IPOs, followed by energy and power.

Jennifer Post, a partner at Thompson Coburn, said the energy market continued to be active. This is due to disruptions in global supply and distribution channels. In addition, the popularity of electric vehicles is also driving deals. “In 2023, there should be companies in these industries looking for IPOs. The urgency of capital investment will be more pressing and growing business and consumer demand should remain strong,” she said.

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