Companies That Had Their IPO in 2022: War, Inflation and Interest Rates

In 2022, the global stock market faced significant challenges, marked by increased volatility and a downturn, particularly contrasting with the growth seen in 2021. Central banks' hawkish response to inflation through interest rate hikes impacted the market as a whole but particularly affected the technology sector, which experienced substantial declines in stock prices. The Russian invasion of Ukraine further exacerbated market instability, contributing to fluctuations in stock prices globally, particularly in Europe, and significantly impacting commodity prices. This geopolitical unrest, along with inflationary pressures and the central banks' responses, played a key role in dampening the IPO market. Companies became reluctant to go public amidst the tumultuous conditions, leading to a marked slowdown in IPOs and a decline in SPAC activity, as uncertainty and caution dominated the landscape.

• High inflation and interest rates: Persistent inflationary pressures led many central banks to adopt a more hawkish stance, either by signaling or implementing interest rate increases. This move was aimed at curbing inflation but also affected investor sentiment negatively.

• A downturn in the markets: while the previous year had seen the markets go on a bull run, 2022 saw all indices start pointing sharply downwards.

• The war in Ukraine: Russia's invasion of Ukraine led to severe fallout in the markets and a surge in energy prices.

• A slowdown in the IPO market: all of the factors mentioned above, combined with the fact that SPACs were falling out of favor, led to many companies opting to not go public during the year.

In 2022, the global economic landscape was significantly shaped by high inflation, a phenomenon that had widespread implications for businesses, consumers, and investors alike. Central banks around the world, recognizing the persistent nature of inflationary pressures, shifted towards a more hawkish stance, characterized by either signaling or the actual implementation of interest rate increases. This policy adjustment was primarily aimed at curbing inflation by making borrowing more expensive, thereby reducing spending and investment, which in theory, should help slow down inflation.

The underlying reasons for the inflationary pressures observed in 2022 were multifaceted. Supply chain disruptions, initially triggered by the COVID-19 pandemic, continued to affect the production and distribution of goods. Recovery from these disruptions was slower than anticipated, contributing to supply shortages. At the same time, demand rebounded sharply as economies reopened, further exacerbating the inflationary pressures. Energy prices also saw significant increases, partly due to geopolitical tensions and supply constraints, adding another layer of complexity to the inflationary landscape.

The central banks' raising interest rates had immediate and far-reaching effects on the financial markets. Firstly, higher interest rates typically lead to increased borrowing costs for both individuals and businesses. For consumers, this could mean higher rates on mortgages and loans, directly impacting their purchasing power and overall spending. For businesses, the cost of financing new projects or expansions became more expensive, potentially slowing down economic growth and reducing corporate profits.

The hawkish stance adopted by central banks globally in response to rising inflation in 2022 had a profound impact on financial markets, leading to a noticeable downturn when compared to the relatively buoyant market conditions of 2021. The series of interest rate hikes designed to tame inflation made borrowing more expensive, directly affecting consumer spending and business investments. This policy shift led to a cooling of economic activity and had several key implications for different segments of the market.

The stock market experienced increased volatility and a downturn in 2022, contrasting sharply with the robust gains seen in 2021. In 2021, markets were buoyed by unprecedented fiscal and monetary stimulus measures, which supported economic recovery efforts and boosted investor confidence. As a result, stock markets, particularly in technology and growth sectors, saw significant appreciation. However, in 2022, the rising interest rates resulted in a reevaluation of the market in general. Higher interest rates tend to discount the future cash flows of companies more heavily, adversely affecting the valuation of growth stocks, which are typically more sensitive to changes in interest rates. This shift led to broad sell-offs in several sectors that had previously enjoyed strong gains, but the tech sector was especially vulnerable to this, and companies large and small suffered massive drops in their stock prices.

However, inflation and interest rates were not the only things that impacted the market in 2022. When Russian artillery, paratroopers, tanks, and infantry rolled over the Ukrainian border it sent the global economy into shock. The uncertainty brought on by the war led to increased volatility in the already anxious stock markets. Investors, wary of the instability and uncertainty that the war had brought overnight, reacted to news developments with caution, leading to significant fluctuations in stock prices across the globe. Europe was extremely affected due to the continent's proximity to the conflict and its dependence on Russian energy. European stocks experienced declines, particularly those in the energy-intensive industries, as the price of natural gas soared. Additionally, companies with significant exposure to Eastern Europe faced declines in their stock prices due to concerns over the conflict's direct impact on their operations.

One of the most significant impacts of the invasion was on commodity prices, especially oil and natural gas. Russia is one of the world's largest producers of oil and natural gas, and sanctions imposed by Western countries, coupled with Russia's own countermeasures, disrupted supply chains.

However, as in almost all times of geopolitical instability, there were a few sectors that saw an uptick in interest and earnings. Some of the most prominent of these were the defense sector with companies like Saab and Lockheed Martin, and the energy industry with companies such as ExxonMobil and Shell.

The conflict also exacerbated existing supply chain disruptions, particularly in sectors like agriculture and automotive, where Russia and Ukraine play significant roles in global supply chains. Ukraine is a major exporter of grains and agricultural products, and disruptions led to rising food prices, affecting companies in the food and beverage sector. Similarly, shortages of palladium, used in automotive catalytic converters and sourced largely from Russia, impacted the automotive industry.

All of the aforementioned factors led to a massive slowdown in the IPO market. Companies were hesitant about going public during such tumultuous and uncertain times, and many prospective IPO candidates elected to postpone their public listing indefinitely. SPACs, which had been incredibly popular during 2020 and 2021 saw a sharp decline in 2022.

While the IPO market in general cooled off severely, there were still several noteworthy IPOs that took place in 2022. The largest of the year was the South Korean company LG Energy Solution, the battery manufacturing division of LG Group. The company specializes in designing and manufacturing lithium-ion batteries for EVs, energy storage systems, and similar applications.

While Porsche AG's IPO wasn't the largest public offering of the year, it was one of the most talked about. In a year where there was a general lack of glamour and prestige in the companies going public, Porsche's election to list its shares despite the market climate generated a fair share of buzz.

Further Reading: The Porsche Family’s Race to the Top

Corebridge Financial, which provides various types of financial services and insurance was spun off from AIG and listed through an IPO in 2022.

The solar module manufacturer Jinko Solar went public in 2022, and while the company is based in Shanghai it elected to list its shares on the NYSE.

The autonomous driving company Mobileye, which had previously been owned by Intel, went public in 2022.

Treasure Global, the company behind the ZCITY app conducted its IPO in 2022.

The indoor farming company Edible Garden, with a focus on sustainable food farming, went public in 2022.

The overall economic sentiment in 2022 was markedly more cautious compared to the optimism of 2021. The combination of rising interest rates, inflationary pressures, and geopolitical tensions contributed to a sense of uncertainty and risk aversion among investors. This combined with the fallout of Russia's invasion of Ukraine led to companies being extremely hesitant to go public during the year, something which would significantly in the following year.