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May 26, 2022

US slowdown in the TMT IPO market in Q1 2022

2021 was a record year for tech, media, and telecom (TMT) IPOs, with a total of 558 listings raising a total of $237 billion. Since 2018, there have been 1,335 TMT IPOs globally, with TMT companies raising total proceeds of $470 billion.

According to GlobalData, the US had the most TMT IPOs between 2018 and 2021 in terms of volume, with 523 over this period. After a strong 2021, with a total of 272 TMT IPOs, the market has now slowed significantly. In the first quarter of 2022, there were only 11 IPOs.

Many companies that were planning to go public in the first half of 2022 have either withdrawn or delayed their listing. This includes Justworks (cloud), Rhodium (blockchain), Authentic Brands Group (ecommerce), and TypTap (fintech).

Most of the companies that had successful TMT IPOs last year are now trading below their offer price or opening price—in some cases losing over 60 % of their value. That includes a number of notable companies, such as Coinbase (blockchain), Robinhood (fintech), Rivian (electric car maker), UiPath (AI), Marqeta (fintech), and Toast (cloud).

What’s behind the slowdown in the TMT IPO market?

There are two main causes of this downturn in the market. The first is instability and geopolitical tensions following the Russian invasion of Ukraine, which has not only affected the US TMT IPO market but also the global IPO market too. The other factor is soaring inflation and the prospects of further increases in interest rates, resulting in falling stock markets.

SPACs are affected amid slowdowns

A special purpose acquisition company (SPAC) is created solely to merge or acquire another business and take it public. As the US SEC (Securities and Exchange Commission) is presenting new policies including removing ‘safe harbor’ protections from SPACs, meaning such deals will require new disclosures related to the fairness of these transactions and certain other controls. This will likely further reduce the attractiveness of SPACs as a route to listing, which may in turn reduce the number of SPAC transactions over the coming year.

The US TMT IPO market will remain healthy

Despite the weak market performance in Q1 2022, several TMT unicorns are still planning to go public in the second half of the year. These include companies such as Reddit (social media) and GoPuff (ecommerce), while several others have also filed for an IPO including Instacart, Mobileye, and Turo.

Instacart, an online delivery platform, confidentially filed for an IPO on March 13, 2022. It has slashed its valuation by nearly 40%, to around $24 billion, after posting a $39 billion valuation last year.

Mobileye, a self-driving company, filed for IPO on March 7, 2022, and is expected to go public in the second half of 2022. The listing could give Mobileye a valuation of at least $50 billion.

Carsharing platform Turo filed for an IPO on January 10, 2022, and is expected to list this year. It plans to raise $300 million on the New York exchange. However, the success of these listings will depend largely on market conditions over the coming months, with the risk of more delays if the outlook does not stabilize.