Following 2021’s record-setting pace of initial public offerings (IPOs) priced on U.S. exchanges, IPO activity dropped sharply in the first half of 2022. According to FactSet data, 1073 companies IPO’d in 2021, raising $317 billion; while in the first half of 2022, the total was just 92 companies, raising just under $9 billion. Of the 92 initial public offerings in the first half of the year, 33 were in the Finance sector led by 27 SPAC IPOs. The Health Technology sector was next with 18 IPOs, followed by Technology Services with 11. The Finance sector led all sectors in terms of total money raised in the first half ($5.3 billion), followed by Health Technology with $1.8 billion. Together, these two sectors made up 79.0% of the total amount raised in the first six months of the year.
There were two main factors at play depressing IPO activity in the first six months of this year. First, after peaking in the first quarter of 2021, the number of IPOs by Special Purpose Acquisition Companies (SPACs) retreated in the final three quarters of last year; and during the first six months of 2022, the numbers slowed even more. Second, the U.S. stock market suffered its worst first half of a year since 1970, as surging global inflation forced central banks to institute aggressive rate hikes after a decade of easy monetary policy. As of June 30, the S&P 500 was down 20.6% year to date.
Looking ahead at future IPOs, 159 companies have released initial preliminary filings since the beginning of 2021 and are still in registration (this excludes offerings that are postponed or withdrawn). Just five of these companies are not SPACs. Given the sharp decline in SPAC activity witnessed in recent months and the current market weakness in the face of continued interest rate hikes, it will be interesting to see if the IPO market can recover in the second half of 2022.