Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many IPOs during the quarter. The dramatic slowdown in IPO activity in year to date (YTD) 2022 after a record year in 2021 was experienced across most major markets.
For Q2/2022, the global IPO market saw 305 deals raising US$40.6 billion in proceeds, a decrease of 54% and 65%, respectively, year-over-year. YTD 2022, there were a total of 630 IPOs raising US$95.4 billion in proceeds, reflecting decreases of 46% and 58%, respectively, year-over-year.
The ten largest IPOs by proceeds raised US$40 billion, with energy dominating three of the top four deals, replacing the technology sector as the top IPO fund raiser. The technology sector continued to lead by number, but the average IPO deal size came down from US$293 million to US$137 million, whereas energy has overtaken to lead by proceeds with average deal size increasing from US$191 million to US$680 million year-over-year.
Special purpose acquisition company (SPAC) IPOs are significantly down in line with traditional IPO activity despite new markets joining. The SPAC market has been challenged this year as a result of broader market conditions, regulatory uncertainty and increased redemptions. A record number of existing SPACs are actively seeking targets with the majority of them facing potential expiration in the next year. However, market performance and regulatory clarity will likely drive future deal flow.
In line with the sharp decline in global IPO activity, there was a sizable fall in cross-border activity affected by geopolitical pressures and government policies on overseas listings.
There were many mega IPOs postponed in the first half of 2022, which represent a healthy pipeline of deals that are likely to come to the market when the current uncertainties and volatility subside. However, strong headwinds from the current uncertainties and market volatility are likely to remain. These include geopolitical strains, macroeconomic factors, weak capital market performance and the impact from the lingering pandemic on global travel and related sectors.
The technology sector is likely to continue as the leading sector in terms of the number of deals coming to the market. However, with greater focus on renewable sources of energy in the face of increasing oil prices, the energy sector is expected to continue to lead by proceeds from bigger deals.
ESG will continue to be a sector-agnostic key theme for investors and IPO candidates. As global climate change and energy supply constraints intensify, companies that have embedded ESG into their core business values and operations should attract more investors and higher valuation.