In the midst of public market downturn: how do private market reacts?
Updated: May 23
With rising inflation and interest rates, slowing economic growth, continued threat of further COVID-19-related shutdowns, as well as continued geopolitical tensions, public markets are declining significantly since mid-November 2021 (NYSE -13% and Nasdaq -28%).
NASDAQ & NYSE Index Evolution
(2020/05/20 - 2022/05/19, daily interval at market close)
The IPO market is sharply decelerating after a record year in 2021. In Q1-2022, a total of $65 billion was raised globally via IPO, down by 70% from $219 billion in Q1-2021. With conditions for new listings becoming less welcoming, firms mulling over an IPO had to postpone their IPO agenda to sit out this period of volatility, notably the Dutch file-sharing company WeTransfer, the bitcoin miner Rhodium Enterprise and insurance technology start-up TypTap.
Following this trend, a total of 92 companies are projected to go public in Q2-2022, marking a 9-quarter low and a 34% drop quarter-on-quarter (QoQ). US-based startups are expected to account for 20 of these IPOs, down by 13% QoQ.
Global Venture Funding 2020-2022
In the meantime, global venture funding fell to $142.4 billion in Q1-2022, representing a 19% drop compared to the record breaking Q4-2021 and the largest percentage fall since Q3-2012. However, Q1-2022 was still the fourth-largest quarter for funding on record and its total was 7% higher than the same quarter in 2021.
In Q2-2022, global venture funding is projected to drop again. With the current pace, global funding is projected to decrease by 19% from last quarter and 25% YoY. Mega-rounds (deals worth $100 million+) are projected to account for $61 billion funding by the end of Q2-2022, which would mark an 18% drop QoQ. In terms of sectors, Global funding for retail tech is on pace to drop by 50% in Q2-2022, with fintech and digital health showing a QoQ decline of 28% and 25%, respectively.
Unsurprisingly, the unicorn club is becoming a bit more exclusive. Quarterly unicorn births are on track to fall below 100 for the first time since 2020, with 62 unicorns projected to emerge in Q2-2022.
Sources: Secondary Capital, EY’s Annual Global IPO Report, Bloomberg, Refinitiv Database, News articles, CBinsights