Record IPO Year Does Not Generate Historic Returns – Stock Market – Stocks, Stock Market, Forex, Commodities, IPO, Bonds

Initial public offerings enjoy legendary status as a top-performing asset class. This will not be the case in 2021.

More than half of the 481 US IPOs this year are trading below their offer price, Bloomberg data shows. Those deals, not to mention an even longer list of specially designed procurement companies, set a record of around $ 167 billion, easily outpacing 2020.

Despite the historic volume, enthusiasm for IPOs waned at the end of the year due to volatility and poor results. While the first quarter of 2022 appears to be busy, expect a volatile year next year.

Of course, 2021 has seen its ups and downs. According to data provider PitchBook, around 180 company-backed companies have gone public in the United States, bringing a value of $ 512 billion to the stock market. This is a huge increase from 105 such IPOs and the value of $ 180 billion last year.

One such venture-backed venture is Rivian Automotive Inc, a maker of electric pickup trucks, which in November completed the world’s thirteenth-largest initial public offering, raising $ 13.7 billion. A month after its debut, Rivian is trading 24% above its IPO price, despite falling 10% last Friday after announcing that it would not meet its production targets.

Low income

Still, on a weighted average basis, the IPO category in 2021 only increased 1.6%, according to Bloomberg data. Meanwhile, the Nasdaq Composite and S&P 500 indices posted returns of 19% and 24%, respectively, despite falling sharply over the past month.

With an annual lead of 347 publicly traded companies in the United States in 2020, they are now 46% higher than the offer price.

The poor results include two of the top five deals of the year. South Korean e-commerce giant Coupang Inc. plunged 14%, while Chinese passenger company Didi Global Inc. fell 57%, eliminating $ 35 billion in market value, and plans to withdraw its shares from trading at the United States under pressure from Chinese regulators.

The macroeconomic consequences of inflation and supply chain disruptions also weigh on listed stocks. Furthermore, young companies are entering public markets earlier after having avoided them for decades. PSPC funds have accelerated company IPOs and that sentiment has spread to the IPO market.

Stronger growth

“The higher growth trends typically seen in the private market are also evident in the public market,” said Sumit Mukherjee, Managing Director of Bank of America Corp.

“Following this year’s IPO results, investors are likely to exercise more discipline on the stock,” Mukherjee said. “And companies will also be more disciplined in the valuations they are willing to accept.”

Heidi Mayon, a partner at Goodwin Procter, who has worked at IPOs such as DoorDash Inc. and Poshmark Inc., described the first half of 2021 as a race for the IPO.

“This has been the most amazing year I’ve had in my career in terms of the number of quality trades,” said Mr. Mayon. “Even though some companies have stumbled a bit after going public, there are still a number of very good results. “

Mayon expects the long-term trend of increasing offerings to continue in 2022, but perhaps not at the same rate as this year.

Outlook until 2022

More than 30 deals are expected to hit the market in January and February, including some that have postponed their offers from 2021, said Nelson Griggs, president of the Nasdaq Stock Exchange.

These agreements will set the tone for next year.

“If these products hit the market and sell well, then the first half of the year will be extremely good,” Griggs said. “If they fight, the first half could be mixed.”

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