What factors are driving the IPO decline on the global stock exchanges
Over the past three years, global stock markets have experienced a severe downturn. IPOs have fallen sharply, and more and more companies are refusing to go public. This situation is a strong signal for investors to take action. The opportunities to invest in securities are shrinking, and so are the opportunities to make big profits.
JPMorgan states that publicly traded securities will fall by US$120 billion in 2024. In the previous period, the figure was US$40 billion. Such trends point to increased uncertainty in the business environment. It is worth noting that the dynamics of share buybacks remain stable. This suggests that the number of securities available for purchase is decreasing.
Duncan Lamont of Schroders notes a similar trend at the global level. He cites the following data:
1. Analysts have recorded a 75% decline in the number of listed companies on the London Stock Exchange since the 1960s.
2. The number of IPOs in Germany has fallen by more than 40% since 2007.
3. The number of public companies in the US has fallen by around 40% since 1996.
The number of companies listed on the London Stock Exchange has fallen by 25% in the last ten years alone.
Factors driving the number of listings
Fewer companies want to list in significant markets, so they are looking for other ways to attract investment. In addition, alternative platforms and sources for raising capital have emerged in recent years.
The market for alternative investments is growing rapidly. In the first quarter of 2023 alone, it has grown to over US$26 billion. For the same period in 2022, the increase was US$25.5 trillion. The sector offers companies a variety of ways to raise capital, including:
– hedge funds;
– digital assets;
– private lending;
– real estate transactions;
– direct investments.
This allows entrepreneurs to go beyond traditional stock exchanges. Moreover, going public is costly and requires following a certain algorithm of actions.
However, it is not only the complexity of preparing and carrying out an IPO that affects the number of listed companies. Many are in no hurry to float their shares because of global economic problems. Investors are cautious in the face of global uncertainty. Companies risk being undervalued and raising less money in IPO than initially expected.
Forecasts for the near future are not encouraging either. Leading economists believe that the global market will remain weak in 2025, a view shared by 56% of the professionals surveyed. Against this backdrop, we should not expect a rapid increase in companies going public. The only sector where an increase in IPOs is possible is technology.
