The new year opened with a bang—but it wasn’t fireworks; it was the sound of a window slamming firmly shut. Following a banner 2021 when initial public offering (IPO) markets smashed all sorts of records, this quarter achieved a different sort of record: the slowest and quietest in decades.
Only 18 new issuers came to market in 1Q22 (versus 101 in 1Q21). Just US$2.1 billion was raised (versus US$39.2 billion a year earlier). Median deal size fell to US$27 million (from US$177 million a year before). One $1 billion-plus listing came to market in the quarter (versus nine in 1Q21). Many highly anticipated 1Q IPOs delayed their launch. PE firms held their portfolio companies on the sidelines.
Interestingly, those issuers that did debut delivered fairly good returns (an average of 33 percent)—albeit the group was made up of mostly small issuers. That added some volatility. Take Japanese retailer Yoshitsu Co, for example. The stock enjoyed a 700 percent first-day pop. But ended the quarter down 21 percent from issue. The one US$1 billion issue (TPG, a financials company) popped more than 15 percent before settling to deliver a 1.7 percent return on the quarter.
Source: Renaissance Capital, IPO Intelligence. US IPO Market, 1Q 2022 Quarterly Review. April 1, 2022.
VC firms have been forced to hold on to companies that they expected to exit. Many are now thinking carefully about how they allocate their capital to ensure they are keeping the late-stage investments growing and afloat while still allocating to newer and earlier-stage plays.
Katie Hilkemeyer, Partner, Audit, KPMG Private Enterprise
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