IPO Demand Is Waning With 87% Of Companies Trading Below Offer Price

By CultureBanx Team

  • 87% of companies that went public in the U.S. last year are trading below their offering prices
  • The IPO market is having its slowest year in more than a decade, with just $7.2 billion raised in traditional new stock offerings in the U.S.

Wall Street seems to have pumped the brakes on Initial Public Offerings (IPO) as the markets continue their roller coaster run. Nearly 87% of companies that went public in the U.S. last year are trading below their offering prices, according to Dealogic. Herein lies the problem, fund managers tend to shy away from new issues, if recent ones they have bought are performing badly. This could keep IPO activity in the doldrums for the remainder of the year.

Why This Matters: The IPO market is having its slowest year in more than a decade, with just $7.2 billion raised in traditional new stock offerings in the U.S. Some of the publicly traded companies that have dug themselves into a deep hole post IPO include Rent the Runway, Robin Hood, Oscar Health and Toast. The companies are down anywhere between 50% – 85% from their initial public offering price.

In 2021, IPOs raised $154 billion in the busiest year for traditional public offerings on record. The majority of IPOs were trading above their offer prices, but by the end of last year, two-thirds traded below.

Situational Awareness: There are plenty of companies waiting for their chance to shine on a big stock exchange. The biggest desire for these companies is stability both in the financial markets and in the broader economy. However, falling stock prices are contributing to significantly lower valuations, which damp the allure of a public debut. Companies are now hoping conditions will improve in 2023, according to IPO advisers.

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CultureBanx Team

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