IPO Fundraising Falls 70% Amid Banking Crisis

The global market for initial public offerings continues to struggle amid banking sector upheaval.

That’s according to data published Sunday (March 26) by Bloomberg News, which found companies have $19.7 billion via initial public offerings (IPOs), down 70% year-over-year and the lowest comparable level since 2019.

The largest drop happened in the U.S., where companies have raised just $3.2 billion. The report says troubles in the banking sector have created uncertainty around interest rates.

“Rates is the number one issue, and there is a clear debate around how long the tightening lasts or changes direction and at what speed,” Udhay Furtado, co-head of ECM, Asia Pacific at Citigroup, told Bloomberg.

“There are a number of things people will need to see, including central bank direction, to ascertain whether it’s the second, third or fourth quarter,” he said, referring to when IPO activity may begin to pick up steam. “At this point, it looks like it’s going to be back-ended.”

Meanwhile, companies that have already gone public are struggling as well, according to PYMNTS’ FinTech U.S. IPO Index, which tracks FinTech return percentages since going public.

As noted here last week, the index saw a 51% loss last year, roughly comparable with the Global X FinTech ETF 52% decline, with IPO funding falling 68% in the same time period.

“Of course, now with the SVB meltdown and general jitters of banks becoming more risk-averse in its wake, funding now may be even more difficult to obtain for FinTechs,” PYMNTS wrote.

Evidence of post-SVB investor anxiety is already becoming apparent, with FinTechs that have gone public since 2020 now trading at 54% below offer price.

Lending platforms have fueled this recent rout in particular, sending the IPO Index south by almost 5% this month. But FinTechs that focus on other struggling industries are also facing trouble, with mortgage facilitation platform Blend recently announcing its stock had dropped 40% over the past five sessions.

“Operating under an IPO’s regulatory constraints that include SEC scrutiny, disclosures and financial auditing, FinTechs going public now must reevaluate their profit strategies to appeal to the post-SVB investor,” wrote PYMNTS.

With revenue being prioritized over potential growth, FinTechs seeking fresh funding may need to pivot to a more steady, sustainable model, something that might be harder than in past years as inflation and increased interest rates put added pressure on profitability.