Nasdaq composite: No small tech IPO in 20 years

(BFM Bourse) – The fall in stock market indices since the beginning of the year has dried up the IPO market for American technology companies. Especially the big ones. No fundraising over $50 million has been done in the last 240 days. Even a new record in 20 years, accounts for Financial Times.

The days of big fundraising for US technology stocks seem well and truly over. We are now entering a time of scarcity. For 240 days, there was no record of any IPO of technology companies valued at more than $50 million, explained the Financial Times.

A sad 20-year record that overturns the standards established after the financial crisis of 2008 and the crash of internet stocks, the famous “.com” or dotcoms in English, from the early 2000s, recalled the FT based on a study by Morgan Stanley.

Not surprisingly, the candidates for listing on the stock exchange were burned by the fall of the indices in reaction to the fight of the American Federal Reserve against record inflation. The Nasdaq Composite, the main index of technology stocks, has fallen 30% this year, compared with more than 21% for the S&P 500. The Renaissance IPO index, which tracks American companies listed on the stock market in the last two years, has lost more than 45%, determines the Financial Times.

Uncertainty, the number one enemy of IPOs

The lack of visibility due to the current market conditions prevents candidates from going public. And Jerome Powell’s latest statements on the Fed’s monetary policy direction for the coming months are unlikely to fuel future operations. More rate hikes are expected until they beat inflation. A context incompatible with an IPO for technology stocks, especially since they are the most sensitive to changes in the Fed’s monetary policy.

“There is a lot of uncertainty in the market today, and uncertainty is the enemy of the IPO market,” Matt Walsh, head of technology capital markets at SVB Securities told the FT.

Even IPOs of well-established and profitable companies can also receive a warm reception, explained the Financial Times. This is the case of life insurer Corebridge, a subsidiary of global insurance and financial services giant AIG. With a fundraising of more than one billion dollars – making it the largest IPO of the year in the United States – this arrival was made on tiptoe with a price set at the bottom of the range.

Even factoring in Corebridge’s fundraising, total US IPO volume is down 94% from a year ago, with $7 billion raised so far in 2022, down from $110 billion at the same time last year, reported the Financial Timesciting data from Dealogic.

A reduced airfoil to preserve profitability

the Financial Times recall that S&P 500 tech companies just hit second-quarter earnings estimates and third-quarter expectations have been repeatedly lowered, with earnings now expected to be less than 4% annually.

“Last year, there was very little talk about profitability [parmi les candidats à l’introduction en Bourse, NDLR]. Today there is more, but the problem of moving from a story of growth to a story of profit is that it takes time for companies to prove their progress in this area, analyzed Nicole Brookshire, a partner at the law firm Davis Polk for the FT.

In the eyes of Matt Walsh, tech companies raised so much money before the market downturn that they didn’t have “the same sense of urgency.” According to him, a “small group” of companies will try their luck this year. But for most of these companies, they have already announced that they are postponing their listing project to 2023, the time to see things more clearly…

Sabrina Sadgui – ©2022 BFM Bourse

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