- [Narrator] In 2021, the IPO pipeline
was flowing with record volume.
An IPO, or Initial Public Offering,
is the traditional way a company goes public
by listing shares on the stock exchange.
And last year, IPOs raised more money than ever.
- One of the biggest IPOs since Alibaba-
- [News Anchor] The biggest IPO of 2021-
- [Narrator] But by December, a broad selloff
in high growth stocks led to 2/3 of those in the US
trading below their IPO price.
And now, the IPO pipeline is seemingly frozen.
- We haven't seen this slow a year
in terms of money raised, since at least 2009.
- [Narrator] That's because sky high inflation,
rising interest rates, and Russia's invasion of Ukraine,
have made the financial markets volatile
and in turn, made investors wary of risky assets like IPOs.
- [Corrie] Everything that you could think
of that would make launching an IPO unpalatable,
like, it was happening.
- [Narrator] And now analysts are worried
that if it doesn't turn around soon,
the IPO freeze could carry over into the new year.
So far this year, traditional IPOs have raised
only around $7 billion.
In a typical year, traditional IPOs would've raised
around $38 billion by this time.
And at this time last year, the number was closer
to 120 billion.
Several major companies, including two Fintech giants,
had anticipated going public in 2022
before the pipeline froze and their valuation
shriveled up with it.
- It was supposed to be the year of the Fintech company.
There were many in the pipeline ready to go.
We have not seen them.
- Klarna Bank AB was one of those highly anticipated IPOs,
but instead of making a splashy debut,
the Sweden-based company laid off hundreds of workers
to cut costs and was forced to seek funding
in private markets.
It's more than $45 billion valuation dropped by 85%
down to $6.7 billion.
Klarna declined to comment on its IPO plans.
Instacart also had to slash its valuation.
In this case, by around 70% to $13 billion.
However, with its growing revenue, Instacart was
among a few companies still hoping
for some heat and the opportunity to go public this year.
- There's a renewed focus on,
show that you can become profitable.
If not right now, very soon.
- [Narrator] But the company reeled back its ambitions
in late October.
In a memo to employees, Instacart CEO said
that tumultuous market conditions
are making an IPO for the company highly unlikely in 2022.
But one area that has broken
through the ice this year is spinoffs.
This is when a larger company separates
one of its subsidiaries or branches
into a separate public company.
Intel self-driving car unit Mobileye
is one of those IPOs expected to come through.
After purchasing the unit for around $15 billion,
Intel was expecting a Mobileye valuation
near $50 billion last year.
But today, Intel's expecting a target valuation
under $20 billion.
Intel CEO has said that listing Mobileye
would give the self-driving car unit a higher profile
and attract more business.
He has also said that Intel doesn't need the money
Mobileye's IPO would generate.
But Mobileye wouldn't be the first IPO
in the auto industry to go public in this weather.
Porsche launched on the Frankfurt Exchange
at the end of September.
Though it's not a US IPO,
many analysts agreed that if Porsche's went well,
it would be a positive sign for the US IPO market.
- However, Porsche's IPO, I wouldn't call a raging success.
Yes, it priced at the high end of its range,
but shares didn't do very well,
didn't have a great pop.
- [Narrator] That pop she's talking about is how bankers
evaluate their initial pricing strategy.
They look for a pop to show momentum,
but not too big of one that would signal money
was left on the table.
Porsche declined to comment on its IPO.
- [Corrie] The joke is how you price an IPO.
It's an art, not a science, as they say.
You wanna see shares go up, maybe not.
You definitely don't wanna see them double the first day,
but you wanna see them rise.
- [Narrator] Now, investors will look for green shoots,
signals that the market is warming up.
However, the indicators of today
may look different than recent years.
- [Corrie] In 2020, 2021, you could go to market
with a dream (laughs) and a vision
of how you were going to make money,
and how you were going to grow so fast.
That isn't gonna cut it in 2022 and 2023,
or at least doesn't look like it will cut it.
- [Narrator] The electric vehicle truck company Rivian
is viewed as one of the last big IPOs
before the market crashed.
It scored a valuation so high
that meant it was more valuable than Ford.
- [Corrie] We're starting to see cracks in the US economy.
Remember, just a couple weeks after Rivian,
that's when the stock market started really shifting
and selling down a lot.
- [Narrator] Rivian's stock price has since come down.
The company was hit with a lawsuit for allegedly misleading
investors about electric vehicle prices,
and recently, it recalled around 13,000 vehicles
for loose fasteners.
Rivian did not respond to a request for comment.
Historically, IPOs are viewed as one
of the riskiest asset classes.
Because you're investing in a brand new company,
few have a history of profits.
However, a flowing IPO pipeline
means companies are raising more money,
which can lead to more hiring,
investing in tech, and employees finally getting
to cash in on their stock options.
So what would it take to thaw the IPO pipeline?
- [Corrie] Success begets success.
So you just need to see a string of IPOs do well
to encourage more companies to want to go public.
- [Narrator] But even as some look
to push the pipeline forward,
the broader financial market remains volatile.
IPO bankers and lawyers agree.
They say the first companies to go public
after the markets calm down should be profitable,
fairly large and must own names.
It all comes down to appetite for risk.
When investors are comfortable stomaching that risk,
the IPO market is strong
and the economy usually looks stable, as well.