Nasdaq composite: There had never been so few tech IPOs in 20 years

(BFM Bourse) – The fall in stock market indices since the start of the year has dried up the IPO market for American tech companies. Especially the bigger ones. No fundraising of more than $50 million has been made in the last 240 days. Either a new record for 20 years, relates the FinancialTimes.

The days of big fundraising for technology stocks in the United States seem well and truly over. We are now entering a period of scarcity. For 240 days, there has been no record of any IPO of tech companies worth more than $50 million, explains the Financial Times.

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

Unsurprisingly, candidates for listing on the stock exchange were scalded by the fall in the indices in reaction to the fight of the American Federal Reserve against record inflation. The Nasdaq Composite, the flagship index of technology stocks, has fallen 30% this year, compared to just over 21% for the S&P 500. The Renaissance IPO index, which tracks American companies listed on the stock market over the past two years, has lost more than 45%, specifies the FinancialTimes.

Uncertainty, the number one enemy of IPOs

The lack of visibility induced by current market conditions deters candidates from going public. And Jerome Powell’s latest statements on the direction of the Fed’s monetary policy for the coming months is not likely to fuel future operations. More rate hikes are to be expected until they finally overcome 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 huge amount of uncertainty in the market right now, 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 are also likely to receive a lukewarm reception, explains the FinancialTimes. This is the case of the life insurer Corebridge, a subsidiary of the global insurance and financial services giant AIG. With a fundraising of over a billion dollars – making it the biggest IPO of the year in the United States – this arrival was done on tiptoe with a price set at the bottom of the range.

Even factoring in Corebridge’s fundraising, overall U.S. IPO volume plummeted 94% from a year earlier, with just $7 billion raised so far in 2022, up from $110 billion in the same period last year, reports the FinancialTimesciting data from Dealogic.

A reduction in the airfoil to preserve profitability

the FinancialTimes recalls that S&P 500 tech companies just hit second-quarter earnings estimates and third-quarter expectations have been repeatedly downgraded, with earnings now expected down 4% year-on-year .

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

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

Sabrina Sadgui – ©2022 BFM Bourse

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