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Who wants to go public? Nobody, for now

“It’s very difficult to do an IPO in such a volatile market,” agrees Gregori Volokhine, president of Meeschaert Financiel Services. (Photo: 123RF)

New York — High volatility, uncertainty and monetary tightening in the United States have deterred nearly all companies from going public immediately, after a banner year for IPOs.

No introduction this week on Wall Street. Only one last week. Over the first quarter, New York will have experienced only 18 “IPO” (initial public offering), with a median fundraising of 27 million US dollars, the lowest in more than twenty years.

For Bill Smith, managing director of Renaissance Capital, “the IPO market is on life support.”

2021 had however been “the biggest year ever seen for IPOs” in the world, according to the firm PricewaterhouseCoopers, with 608 billion US dollars raised in 2,682 operations.

“We have a lot of files pending,” explains Frank Sebag, partner at EY.

First responsible for this brake, the war in Ukraine, of the general opinion.

“Whenever there are international tensions,” explains Frank Sebag, “this has a strong influence on IPOs and on the whole range of financing.”

“It’s very difficult to do an IPO in such a volatile market,” agrees Gregori Volokhine, president of Meeschaert Financiel Services. In this context, “companies applying for a listing like investors are naturally more cautious,” concedes AFP Euronext, which manages seven European stock exchanges.

“You just have to come across a day with very bad news about Ukraine, and your IPO is a disaster,” says Gregori Volokhine. “So companies or bankers are not comfortable.”

The Nasdaq benchmark index, the popular stock exchange for technology companies, has thus recorded since the beginning of the year 8 of the 20 largest daily declines in its history.

“The first sessions give a little direction,” insists Gregori Volokhine. “Once a company has been rejected by institutions, afterwards it is very difficult to repair the damage.”

Many are still aiming for 2022

The halt is also due to the disappointing performance of companies that joined the rating last year, according to Matthew Kennedy of Renaissance Capital.

Arriving with a bang in early November, vehicle maker Rivian has lost more than 70% of its value since its peak.

The price has been almost the same for all the major introductions of 2021, from the popular brokerage application for small holders Robinhood (-84% since last July) to the video game platform Roblox (-66%).

For Matthew Kennedy, it was the US Federal Reserve (Fed) that put an end to the party.

“One of the main reasons for the poor course of these growth stocks is the transition from an environment with zero interest rates to a more normal environment,” explains the analyst.

By raising its rates, the Fed penalizes these young companies whose growth is based in particular on cheap credit, which need to invest massively. The central bank also makes promised returns less attractive relative to average interest rates.

“Without the invasion of Ukraine, we would have had a few more introductions”, considers Matthew Kennedy, “but it would still have been relatively weak compared to last year or even to an average year.”

The European manufacturer of charging stations for electric vehicles Allego has chosen to make the leap all the same, on March 17, on the New York Stock Exchange.

It nevertheless went through a SPAC (special purpose acquisition company), an already listed financial vehicle that merges with a company to allow it to enter the stock market more easily than via a traditional IPO.

Thanks to a specific mechanism, “we knew that we had a minimum of funds that would be raised as part of this operation”, explains the general manager, Mathieu Bonnet. “That’s why we wanted to go there.”

“We don’t know the future market,” he said. “Maybe the window wouldn’t have opened for several months.”

With few exceptions, the tap has also closed for SPACs, the darlings of 2021, in part due to renewed attention from regulators, in the first place the American market policeman, the SEC, which announced on Wednesday stronger regulation.

“The outlook for the IPO market is cloudy” in the near term, according to Bill Smith. The big names that were announced in 2022, such as the nugget of autonomous driving Mobileye, the social network Reddit or the yogurt giant Chobani, will probably still have to wait.

“But many companies are still aiming for 2022,” says Bill Smith. According to Matthew Kennedy, “there are at least 100 groups that are ready for an introduction (in the United States) as soon as investors are ready to welcome them”.

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