WEBVTT - Global IPO Market Slows After Record 2021

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, companies

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<v Speaker 1>last year defied the pandemic to go public at a

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<v Speaker 1>record pace. Fast forward to this year, things look quite

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<v Speaker 1>a bit different. We've got market volatility, we've got inflation,

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<v Speaker 1>and fears of a downturn brought an abrupt end to

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<v Speaker 1>the listing party. Check these numbers out, Katie. Companies have

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<v Speaker 1>raised to combine four point nine billion dollars via US

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<v Speaker 1>I p o s this year, less than six percent

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<v Speaker 1>of the record some raised in the first half. That's

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<v Speaker 1>according to data compiled by Bloomberg. So there's been quite

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<v Speaker 1>a drought. Rachel Garring is I p O leader at

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<v Speaker 1>e Y America. As Rachel joins us on the phone

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<v Speaker 1>from Nashville, Tennessee, Rachel, how are you. I'm great, Thank you, Well,

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<v Speaker 1>it's good to have you with us. What do you

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<v Speaker 1>make of the downturn that we've seen in I p

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<v Speaker 1>O s this year? When does it turn around? Well,

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<v Speaker 1>that's a great question. Um. We are definitely an a

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<v Speaker 1>wait and see period right now by both companies and

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<v Speaker 1>issuers for all the reasons you just mentioned, right, rising

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<v Speaker 1>interest rates, insulation, supply chain disruptions, continued workforce destructions, and

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<v Speaker 1>access to talent. We've got valuations kind of correcting themselves

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<v Speaker 1>from the highs. And then you know, the overall performance

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<v Speaker 1>of the I p O classes is far below the

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<v Speaker 1>overall market, so that doesn't bode well. Um, And why

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<v Speaker 1>we're seeing kind of that that pause right now that

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<v Speaker 1>we're experiencing and companies preparing on the sidelines. Um. I

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<v Speaker 1>think moving forward, we're going to see new issuers come

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<v Speaker 1>to market that have both a strong growth and profitability story.

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<v Speaker 1>And Rachel, I mean, is it fair to say that

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<v Speaker 1>there's companies in the pipeline, in the I p O pipeline,

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<v Speaker 1>but they're just waiting out the market conditions. Absolutely. I

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<v Speaker 1>think there's a lot of companies who still have a

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<v Speaker 1>strong interest in I p O s. It's not a

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<v Speaker 1>matter of if, it's just a matter of when. So

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<v Speaker 1>they're navigating through these uncharted waters uh currently um, and

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<v Speaker 1>also waiting for investors to be back interested in this

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<v Speaker 1>asset class. As you know, investors have been really challenging

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<v Speaker 1>their their own portfolios rebalancing, looking to more defensive sectors.

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<v Speaker 1>So companies are preparing UM and and that's that's where

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<v Speaker 1>my optimism comes into play, where we're having conversations with

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<v Speaker 1>companies on a daily basis that are still interested in

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<v Speaker 1>in an I p O, whether that's this year or

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<v Speaker 1>in what kind of like what kind of I p

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<v Speaker 1>O are they interested in? Are they interested in a

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<v Speaker 1>direct listing? Are they interested in you know, when we

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<v Speaker 1>saw slack do that which has since been acquired by Salesforce.

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<v Speaker 1>Uh we what about or they interested in a traditional

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<v Speaker 1>I p O? And you know, let's save this bat

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<v Speaker 1>conversation for a few minutes down the line too. Yep.

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<v Speaker 1>So I think I think we're going to continue seeing

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<v Speaker 1>the numbers largely in traditional I p O. S Uh,

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<v Speaker 1>there's an interest in direct listing. More conversations are occurring

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<v Speaker 1>UM from companies around that. Uh. It's still you know,

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<v Speaker 1>not necessarily the most tried and true path, if you will, um,

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<v Speaker 1>but with that option to to to raise capital alongside

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<v Speaker 1>a direct listing, no one's yet done it before. We

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<v Speaker 1>need somebody to take that plunge, if you will. And

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<v Speaker 1>let's go right to SPACs now temp is that over?

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<v Speaker 1>Is that? Was that just like a brief sweet dream

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<v Speaker 1>where SPACs were really awesome and everyone did them and

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<v Speaker 1>now it's over. You know, we don't think so. SPACs

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<v Speaker 1>have been around for decades, UM certainly caught a lot

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<v Speaker 1>of attention late, so I think they have staying staying power.

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<v Speaker 1>There's obviously, you know, not only the general UH market

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<v Speaker 1>dynamics that are impacting everybody and even the traditional I

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<v Speaker 1>p O s that we mentioned, but with also impacting

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<v Speaker 1>SPACs is the uncertainty around regulation. So more certainty around

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<v Speaker 1>that regulation coming from the SEC and otherwise UM needs

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<v Speaker 1>to occur for then all of the stakeholders in a

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<v Speaker 1>spect for spect sponsors and underwriters and so forth to

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<v Speaker 1>be able to respond and adapt. But I think they

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<v Speaker 1>will respond and adapt. And will we see highs like

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<v Speaker 1>we did in Probably not. But do they go away completely?

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<v Speaker 1>I don't think so. Rachel. Can you give us some

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<v Speaker 1>insight into the in the type of work that you

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<v Speaker 1>do as I p O leader for e Y America's

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<v Speaker 1>are what are the companies you work for and work with?

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<v Speaker 1>We work with companies across all sectors UM private companies

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<v Speaker 1>that are looking to go public, advising them through not

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<v Speaker 1>only the I p O process UM and what to expect,

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<v Speaker 1>but also I think equally important the public company readiness component.

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<v Speaker 1>These organizations. As a private company, they've they've been focused

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<v Speaker 1>on growth, They've been focused on their customers and their business,

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<v Speaker 1>as they should be. Now as you transition to a

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<v Speaker 1>pub company, you really need to have broader functional areas

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<v Speaker 1>built out with a strong degree of discipline. We help

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<v Speaker 1>advise companies through that whole path in making sure not

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<v Speaker 1>only they're ready for the I P O transaction, but

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<v Speaker 1>then also being a successful public company on the on

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<v Speaker 1>the backside of that, and how will they perform and

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<v Speaker 1>respond and are they prepared for the demands of being

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<v Speaker 1>a public company. Maybe this is a wild card, but

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<v Speaker 1>have we seen sort of the reverse? Have we seen

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<v Speaker 1>any noticeable uptick in companies going private leaving the public markets.

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<v Speaker 1>I don't think we've seen so much a trend as

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<v Speaker 1>of yet. You know, there's certain certainly um situations where

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<v Speaker 1>that's occurring um in any year for for a variety

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<v Speaker 1>of reasons. I don't know that we've seen enough information

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<v Speaker 1>though to indicate a trend um in this moment. So

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<v Speaker 1>if we think about what the remainder of two looks

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<v Speaker 1>like and going into three, if there is indeed a downturn.

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<v Speaker 1>If we start to see companies really pull back on hiring,

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<v Speaker 1>if we see a recession, what does that mean for

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<v Speaker 1>the work that you do any y, I don't think

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<v Speaker 1>it really changes a lot, because companies will need to

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<v Speaker 1>continue as they're navigating those waters. They're going to continue challenge,

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<v Speaker 1>challenging the efficiency of their business and how it's run,

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<v Speaker 1>as well as the discipline. And that's where we really

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<v Speaker 1>can provide a lot of value to organizations as they

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<v Speaker 1>shore up UM, whether it's how they leverage technology, how

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<v Speaker 1>they think about their talent and their workforce, the geographies

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<v Speaker 1>in which they're operating in UM, and trying in identifying

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<v Speaker 1>where efficiencies can be gained so that they can be

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<v Speaker 1>a stronger company coming out of this market downturn. And

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<v Speaker 1>I don't know, something we talk about often in the

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<v Speaker 1>context contents of the past few years we have UH

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<v Speaker 1>is that you saw a lot of demand pulled forward

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<v Speaker 1>for a lot of companies. And we only have about

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<v Speaker 1>forty seconds here, but I'm curious, you know how much

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<v Speaker 1>of the slowdown we're seeing right now is just because

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<v Speaker 1>we had so many companies go public already. That is

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<v Speaker 1>a great point and I think we are seeing that

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<v Speaker 1>there are companies who really took advantage of the valuations

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<v Speaker 1>in the market, so they pulled forward, they accelerated, So

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<v Speaker 1>I think that is something that we are seeing right now,

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<v Speaker 1>particularly when you look at what didn't didn't happen in

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<v Speaker 1>the first quarter and into the second quarter. But certainly

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<v Speaker 1>the overall market dynamics um are also impacting a lot

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<v Speaker 1>of companies in their plans. Rachel Garying, i p O

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<v Speaker 1>leader at e Y America's Rachel, thanks so much for

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<v Speaker 1>taking the time talking to us all about the I

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<v Speaker 1>p O market this year and what to look for

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<v Speaker 1>in the remainder of the year.