Financial Insights

Global IPO markets fall 70% as war and inflation reduces risk appetite

IPO markets have plummeted globally as the Russia-Ukraine war has resulted in inflation and market volatility which in turn has curbed the investors’ appetite to risk their funds in new companies.

Around $65 billion have been raised worldwide in 2022 through IPOs against the $219 billion in 2021. This places the global market at its lowest level since the coronavirus pandemic.

2021 saw a surge in equities worldwide as equity markets performed very well that year. Today, with rising inflation, rising bank interest rates and investors’ fear have set a different tone.

The Cboe Volatility Index, a widely watched gauge of expected market swings, jumped above 30 when Russia invaded Ukraine and has had an average reading of about 26 this year, signaling IPOs might be too risky of an investment to receive sufficient appetite. Historically, a majority of global listings have been priced when the index has been below 25.

Some companies, like LIC are playing it safe and delaying their IPOs to wait for more stable markets. However, companies like Plentitude and Galderma are jumping into the fray to test the waters.

LIC, which is set to be one of the largest IPOs in the world and the largest in India ever, is looking for a mid-May timing to launch its IPO to raise its $8.5 billion for the Indian government.

Highlight by Aman Agarwal.

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