Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Although the two companies didn’t provide any reason behind withdrawing their IPO applications, the current market scenario shows that investors have very little appetite for new companies.
Stock markets across the world have been facing major slowdowns this year in 2022. Valuations have some of the top companies have dropped 30-40% with investors getting hesitant about investing in new-age companies. The red-hot IPO market of 2021 has entirely lost its charm. So far in 2022, the IPO market looks frozen and shows no signs of reopening again. Owing to such a muted response, companies aren’t willing to go public. On Wednesday, July 13, two companies – Fresh Market and Justworks decided to withdraw their filings for the Initial Public Offering (IPO).
Both the companies submitted their short filings to the US Securities and Exchange Commission (SEC) and added that they no longer want to pursue the stock sale. Both the companies announced their plans to go public last year in 2021. These companies have provided no reason behind the recent reversal in the decision.
As said, amid the market plunge of 2022, investors don’t have a similar appetite for new public issues, like the last year. The tech-heavy Nasdaq Composite has corrected more than 28% this year. Similarly, the S&P 500 has also corrected by over 20%.
The State of the IPO Market
The state of the IPO market has turned bleak with companies struggling to find their way to the public market. The Renaissance IPO ETF tracks the “largest, most liquid, newly listed US IPOs”. As per the details of the ETF, the IPO market has plummeted 46% so far in 2022.
As per the data provided by Ernst and Young, the global IPO volume tanked 54% during the second quarter of 2022 in comparison to the previous year. Similarly, the proceeds in the offerings have dropped by a staggering 65%.
New York-based software vendor Justworks was planning to go public after a healthy set of numbers by May 2021. However, Justworks’ competitors have been doing poorly this year. Paycom is down 26% this year; Paylocity by 24%; and Paychex is off 15%. This could be the reason behind the company not proceeding with its IPO.
Similarly, food retailer Fresh Markets is also facing the heat of the market slowdown. Fresh Market has been competing with top retailers like Kroger, Albertsons, Trader Joe’s and even big players like Target and Walmart. Earlier in May, Fresh Market decided to sell 67% of the company to a South American retailer Cencosud for $676 million.