SEC Small Business Capital Formation Advisory Committee Reviews Public Market | Mayer Brown Free Writings + Perspectives


[author: Carlos Juarez]

The Securities and Exchange Commission’s Small Business Capital Formation Advisory Panel hosted a panel discussion on recent trends in company IPOs at its meeting on October 13, 2022. The panel, “ Public Market IPO Update: 12-Month Review of the State of the IPO Market,” began with an overview of equity markets from Refinitiv.

Over the past twelve months, the companies have raised capital through a wide range of transactions, including “traditional IPOs”, follow-on offerings, convertible note offerings, and also accessed procurement through initial business combinations with SPACs, traditional reverse mergers and direct transactions. Advertisement. However, overall activity in the US equity markets declined sharply. According to data from Refinitiv, companies raised $89.3 billion in all of these equity offerings in the first nine months of 2022, representing an 80% year-over-year decline.

The IPO market was similarly affected. In 2021, 318 U.S. companies went public on U.S. exchanges, which was the highest number of IPOs since 2000. In the first nine months of 2022, however, the number of IPOs decreased by 94% from the first three quarters of 2021. This is the slowest IPO market since 2009. Companies raised $6.6 billion in the first nine months of 2022, the lowest levels capital raised since 1990. With respect to SPACs, Refinitiv estimates that while around 400 SPACs are still looking for merger targets, overall capital raising by SPACs has slowed significantly.

Traditional U.S. Listed IPOs
Source: Refinitiv

As in previous years, technology, healthcare and industrial companies continue to account for a large share of IPOs. Between January 2021 and September 2022, the tech sector raised $43.0 billion in 82 deals; the healthcare section raised $26.8 billion in 151 deals; and the industrial sector raised $19.7 billion in 21 deals. Initial IPO filings also decreased from 293 in the first nine months of 2021 to 80 in the comparable period of 2022. There were 17 initial IPO filings in September 2022, or more than 21% of all filings in 2022, which may indicate renewed interest in access to public markets.

The panel discussion followed with insights provided by PwC. Based on market knowledge and ongoing concerns about difficulties accessing public markets, the committee voted to recommend to the SEC harmonization of rules for IPOs, SPACs, and direct listings.

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