Recession concerns drive investor hold-and-wait mindset for IPO assets
An anticipated recession has negatively impacted expectations. Economic uncertainty, lower valuations, and continued Fed rate hikes have convinced companies and private equity sponsors to hold off on exiting via IPO or raising capital. And they’ve convinced investors to shift away from high-growth IPO prospects towards businesses with strong fundamentals. These macro headwinds have been reinforced by heightened regulatory scrutiny and increased SPAC redemptions, leading to steep year-over-year drops in both traditional and SPAC IPOs.
Activity is likely to remain sluggish through H1’23. Private equity continues to exit via sales to corporate or other private equity. We expect more favorable conditions to propel IPO activity in H2’23, particularly considering a very healthy pipeline of IPO candidates.
Source: KPMG, see below
- New SEC rules adopted in 2022 have brought SPAC disclosures, diligence, and liabilities closer to the process followed by traditional IPOs.
- This expanded framework created headwinds for new SPAC formation just as market conditions became unfavorable.
- The regulatory uncertainty, heavily publicized examples of a few bad apples and media negativity have bruised the SPAC market.