Due to the volatility of the market and the constant fear of going bankrupt, the IPO market has stalled severely in 2015. The largest turn concerning investors’ wariness in regards to companies that were planning to go public was felt in the later half of the year, starting with the massive downturn of August, as well as the US’ September market correction.
The amount of funds gathered from Initial Public Offering of stock in 2015 decreased as well, reaching a total value of $30 billion, significantly lower than previous year’s $85.3 billion, in the US. Globally, the same decrease was felt, brought by a reduction in company ambition as soon as they hit the public market, reaching the value of $153 billion, 30% lower than last year.
Even so, Asia still remained the most significant driver of IPOs, despite China’s stock market problems stemming from investigations conducted on several brokerage firms. This was also boosted by the Japan Post’s movement of making their banking, insurance and holding companies go public in three phases over the course of October.
In regards to the different sectors where IPOs were conducted, healthcare took the lead, followed closely by energy. The technology department suffered from a 50% fall concerning their IPO activity, dropping to only $2.3 billion raised by 22 companies, in comparison to 2014, when 55 companies raised $32.3 billion.
Although the value of last year’s IPOs might seem exponentially greater than this year’s showing, one must take into account that $25 billion were raised by only one firm, the Chinese e-commerce company Alibaba. Because this year, no other major company has experienced such an incredible market showing, with the largest IPO being First Data with $2.5 billion, it’s not entirely surprising that the total value also dropped considerably as well.
But this might not be entirely detrimental to the stock market as a whole. Because tech companies are prying away from IPOs considerably, venture capitalists are expected to increase exponentially, suffering from a boom topped by only the market bubble of 2000.
Market advisers also claim that in 2016, more technology companies will enter the public market, due to the increased wariness of investors. This side of the stock market is also considered to be the proving ground of companies, were only large and established business enterprises can thrive. By refraining from IPOs, companies are also negatively impacting their employees who hold stock, because once in the public market, these shares’ values rise considerably, especially if the company proves to be completely successful.
Even though the IPO market has stalled severely in 2015, the most popular group still remains in the form of enterprise software makers, according to the top 3 investment banks, JPMorgan Chase, Morgan Stanley and Goldman Sachs. If the market’s volatility will calm down in the next quarter of 2016, bringing with it an increase in IPOs, only time will tell. The whole global market has to equalize itself to a pretty large extent before that becomes a possibility instead of a mere allegation.