In the wake of economic effects from the Omicron COVID variant and continued uncertainty concerning current events, such as the conflict in Ukraine, investors will face a lot of challenging decisions in 2022. One area in which this will play out is Initial Public Offerings or IPOs. Already this year, several highly anticipated companies have delayed listing due to market conditions. Several trends and changes are expected during 2022, which are explained below.
Challenges in Pricing
After the IPO boom in 2021, followed by the market downturn, pricing IPOs is especially challenging right now. IPOs always come with a level of risk, like most investments, as no one can fully predict how they will perform. However, things are incredibly unpredictable in the current market, which is particularly affecting growth-stage startups that don’t have as established records of performance. There are, however, record amounts of Venture Capital, so startup founders are in a good position. Pricing these IPOs will be especially difficult and a significant factor in the next point.
Reduced Valuations
With the market downturn, IPOs will be facing reduced valuations. There are already some dramatic changes in valuations being seen, and that trend is expected to continue. This may be frustrating for companies trying to file IPOs in this market, but after the long-running hot tech market, some investors are actually glad to see things calming down a bit. One thing is for sure; investors will be cautious about their IPO decisions this year.
Paused IPOs
Several significant companies filed for IPOs in late 2021, but after recent months have delayed listing. This will likely continue until there’s a promising upswing in market conditions. After an excellent IPO year in 2021, many companies were eager to get in on the action–but now, with a more rocky market, business owners aren’t sure it’s worth it anymore. Expect some particularly anticipated companies to hold out for a while before officially going public.
Favor Towards Tech Companies
While the tech market hype is slowing down a bit, it is still one of the most reliable investments on the market, so tech companies will have an easier time. Investors are wary right now, and the long-term value of tech companies offers more security than other companies with fewer barriers to market entry.