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21 Nov 2021

Global IPOs Cross $600 Billion Mark; Highest IPO Activity Seen in a Decade

The Index Today

Global IPOs have beaten their own record this year, hitting the $600 billion mark through high valuations.

According to data gathered by Bloomberg, around 2,850 businesses and acquisition companies have raised $600 billion in IPOs so far this year. In Asia, China Telecom Corp raised 54 billion whereas in the U.S, Rivian Automotive Inc. raised almost $12 billion this month. In Europe’s region, Poland’s InPost SA claimed the top spot for raising the most through an IPO with 2.8 billion euro’s listing.

Most companies benefited from the boom as central banks kept cash flow sustainable along with the support of economic stimulus programs. Corporate earnings were seen high as companies stepped in to take advantage of high stock prices and earnings. However, despite the growth factor, the trail for IPOs hasn’t been all smooth due to regulatory concerns and scrutiny. China’s tough crackdown on the technology sector had ripple effects on the world market, pushing down Chinese listings in the U.S and Hong Kong.

Cleaner energy startups and electric vehicle companies have increased investor appetite. Rivian, one of the leading electric car start-ups doubled their revenue in the first few rounds of funding, soaring past many renowned vehicle companies in terms of value. However, market analysts are signaling an upcoming bubble due to outsized gains. Susanna Streeter, senior analyst at Hargreaves Lansdown Plc stated, “As monetary stimulus programs are scaled back, and if global growth slows sharply, markets could be heading for a correction. Overvalued companies will feel the pain much faster than others.”

Some IPOs have seen a rough year with revenue streams disappear quickly. Kuaishou Technology went down 16% after seeing shares triple in value during the initial stages. Other IPO flops include the Indian digital payments providers, Paytm, suffered a 27% drop. In Europe, food delivery startup Deliveroo fell by 26%. Most failed listings were seen during the second half of the year.

The sector for Special Purpose Acquisition Companies offers a questionable outlook after reaching $159 billion earlier this year before retreating. James Palmer from Bank of America Corp’s head of ECM in Europe and the Middle East said, “The SPAC fervor has calmed and that’s good for the ongoing health of the market as issuance is now at a more sustainable level globally.”

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