12th January 2023

It was a tough year for the IPO market in 2022 as the number of IPOs plunged 45% to from last year while the amount of proceeds raised dropped at an even steeper rate of 61%, according to EY. 

More companies shelved their ambitions to go public because the bulls gave way to the bears in 2022 as market conditions became much more difficult thanks to high inflation, rising interest rates and slower growth. That shook confidence in the markets, reduced appetite for riskier opportunities and tested valuations. Those that did take the plunge found it more difficult to raise cash, which led to smaller average deal sizes, and most have suffered hefty declines since going public. 

There are hopes that the IPO market will stage a recovery in 2023 thanks to a backlog of companies in the pipeline that plan to go public after delaying their plans in 2022.

However, the landscape remains challenging considering inflation remains high, rates continue to rise and economic growth is slowing, all of which is fuelling fears of a recession in 2023. Companies have managed to muddle through and delay their listing plans in 2022 due to the tough macro-economic climate and will continue to wait in 2023 until conditions improve. That suggests the IPO market could remain muted in early 2023 and that any significant revival is more likely to occur in later on in the year – and contingent on the economic outlook improving. 

Investors are currently favouring companies that can deliver resilient profits and cashflow during tougher times over those with growth potential and this will be an important consideration for any company willing to set sail in what will be rough seas in 2023.