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These were the worst IPOs of 2022
Following the IPO bonanza in 2021, it looks like much of the strong, positive momentum failed to materialise in 2022. The IPO market in 2021 recorded the highest number of new floats in a decade, more than the previous two years combined.
Nearly half of the listings in the first half of 2021 came from the resources sector, propped up by booming commodity prices, low interest rates, buoyant stock markets, and an insatiable thirst for high-valued growth companies. These factors helped drive companies to take advantage of a thriving IPO market. According to EY, Australia recorded a total of 240 companies listed in 2021, up 159 percent from the previous year.
In contrast, many of the favourable drivers that helped boost the IPO market in 2021 quickly faded away and didn’t materialise during 2022, due to a perfect storm of events that occurred throughout the year.
As economies started to emerge into a post-Covid world, central banks turned off their stimulus efforts and switched their focus onto the knock-on effect, rising inflation. At about the same time, the world was hit with supply-chain disruptions and instability in Russia/Ukraine, while attempting to decarbonise and shift towards renewable energy.
Finally, a surprisingly high inflation rate has led many central banks to raise rates at a rapid rate, causing a seismic shift in economic conditions. The global instability and heightened uncertainty led to a huge correction in the tech sector and cryptocurrency markets. The upshot of all of this is a lot of volatility, combined with an elevated risk at a time when investors began rotating out of risk assets, driving sentiment to its lowest levels. All of which would scare off any prospective IPO investor.
While the figures for the last few months of FY22 are not out yet, it’s fairly clear the favourable conditions seen in the IPO market over the last few years have become a lot more challenging. Even more so, for the brave companies that listed. In 2022, 17 IPOs have appreciated, while 39 IPOs are in the red, and another 17 are yet to list.
All-star Covid-hero Afterpay successfully sold its business seconds before the storm hit. With interest rates on the rise, loss-making risk assets such as growth stocks, once the flavour of the day, was quickly tossed out with yesterday’s trash. In under a year, the rapid rotation saw Zip Co’s (ASX:Z1P) share price tumble from $8.23 to 48 cents. That’s a 94.3 per cent fall, taking its market capitalisation from $4 billion to just $259 million. The entire BNPL sector was decimated. Unfortunately, Beforepay Group’s (ASX:B4P) listing came after an incredibly challenging period for the traditional BNPL players. Beforepay’s payday lending against future salary failed to attract the ‘growth investor’ interest.
Walking straight into the storm, the pay-on-demand company lost 44 per cent of its value on the first day. Shares fell from $3.41 to $1.92 by day’s end. The stock is down 93 percent at the time of writing, trading at 24 cents.
Other notable falls seem to remain within the ‘growth’ risk asset space i.e. tech and fintech sector. Shares in investment trading app, Halo Technologies (ASX:HAL) were listed at $1.20, but have since fallen 81.7 per cent, to 22 cents, despite being already profitable with 3,800 subscribers on the platform. My Rewards International (ASX:MRI) which is a global provider of rewards, recognition and loyalty programs, suffered a 70.5 per cent fall from its listing price of 20 cents, to 6 cents.
On the flip side, the big winners of 2022 were mineral exploration companies that were looking for critical minerals used in battery technology. These include nickel, cobalt, lithium, uranium, rare earths, copper and platinum. The best performing IPO of 2022 was Nico Resources (ASX:NC1) – The company is underpinned by heavy demand for nickel and cobalt. Blackstone Minerals, which holds a 15.1 per cent stake in the company, says its nickel resource is one of the largest resources in the world. At a time when nickel is in serious demand for lithium-ion batteries, its share price has exploded by 262.5 per cent, from a 20 cents listing price to 73 cents. Other mineral exploration companies in the same space were Southern Cross Gold (ASX:SXG), up 122.50 percent; Belarox Ltd (ASX:BRX), up 87.5 per cent; and Maronan Metals (ASX:MMA), up 72.5 per cent.
All in all, it’s been a challenging year for many newly listed companies. Those that were connected to the “green” clean battery minerals exploration space did well, and everyone else did awfully bad, especially the fintechs. The outlook for the next financial year is even more clouded than ever before. As long as the current shift to hike rates to stem rising inflation continues, investors will shy away from growth stocks in a rising interest rate environment. This is a significant impediment to the IPO market, which hopefully, central banks can get under control. The crisis in Ukraine, together with supply-chain, disruptions should dissipate.
According to PWC’s Global IPO Watch report, if volatility does moderate, it sees the potential for “significant assets to be ready to take advantage of a market window if one opens and the backlog of IPOs could lead to a strong upswing in volumes…ESG continues to gain increasing focus from equity investors and will be a critical factor in their investment decisions. Given all of these factors, we would expect a heightened focus on risk management, corporate and market resilience.”
Here are upcoming IPOs that are in train for the next few months:
