The second quarter of 2022 sent a chill in the global equity markets due to the fears of recession and the invasion of Ukraine by Russia. This has ended up depriving banking institutions of the lucrative fees they usually earn for arranging sales of stock, such as organizing initial public offerings (IPOs).
ECM deals go down
Refinitiv data shows that global investment banks saw the fees they usually derive from deals in the equity capital market (ECM) decline by 74% because of the slowdown, which brought it to a low of $2.6 billion. Global ECM markets also had their worst quarter in the last 13 years.
There was a decline in both European and US deals due to which a total of $94 billion was generated via capital raising exercises and IPOs between the period of March-end and June 21st. This is only a quarter of the amount that had been generated during the same time period in the previous year.
However, bankers are hoping that the second half of the year will bring some improvement, with the next available IPO window expected to be taken up by Galderma, the skincare firm, chipmaker ARM, and luxury automaker Porsche. However, some of the IPO hopefuls have decided to write off this year entirely.
Market analysts said that it was not going to be materially possible this year to come close to the volume of operations seen in the previous year because there is just no time.
On Thursday, Italian company Industrie De Nora recorded a decline of 3.1% in its Milan debut. The electrode maker became the first major firm to be listed on the main market in Italy after Russia sent its troops into Ukraine.
Last week, ABB, a technology and engineering company based in Switzerland, decided to postpone the initial public offering (IPO) of its electric vehicle charging plan in light of the ‘challenging’ conditions in the market.
The same reason was also cited by Eni, the gas and oil group in Italy, as it opted to postpone the market debut of its renewables and retail unit. There have been similar moves by companies based in the United States, which include Inter Corp’s self-driving car unit Mobileye and Reddit Inc.
Market analysts said that most of the companies in the healthcare, tech and consumer-related sector had decided to postpone their IPOs to enter the market after the Labor Day holiday, which will fall on September 5th. As a matter of fact, there are some candidates that have decided to delay their IPOs to as long as 2023.
Some of them have decided to push them forward until there is a clear view of inflation and the interest rate path of the central banks. Europe and the United States only accounted for 9% of the global IPO market in the second quarter, even though their share is traditionally 60%. This marks a decline of 96% from the previous year.