SEC Small Business Capital Formation Advisory Committee Examines the Public Market | Mayer Brown Free Writings + Perspectives

[author: Carlos Juarez]

During its October 13, 2022 meeting, the Securities and Exchange Commission’s Advisory Committee on Small Business Formation held a panel discussion on recent trends in listing a company. The panel, “Update on the Going Public Market: A 12-Month Review on the State of the IPO Market,” began with an overview of Refinitiv’s stock markets.

Over the past twelve months, companies have raised capital through a wide variety of transactions, including “traditional IPOs,” follow-up offerings, convertible bond offerings, as well as access to the public markets through initial business combinations with SPACs, traditional reverse mergers and direct listings. However, overall activity in the equity capital markets in the United States has declined sharply. According to data from Refinitiv, companies raised $89.3 billion in all of these stock offerings in the first nine months of 2022, an 80% year-over-year decline.

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The IPO market was similarly affected. In 2021, 318 US companies went public on US exchanges, the highest number of IPOs since 2000. However, in the first nine months of 2022, the number of IPOs fell by 94% compared to the first three quarters of 2021. This is the slowest IPO market since 2009. Companies have raised $6.6 billion in the first nine months of 2022, the lowest level of capital since 1990. With regard to SPACs, Refinitiv estimates that while approximately 400 SPACs are still pursuing merger targets, the raising of capital by SPACs has been significantly delayed.US-listed traditional IPOs

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US-listed traditional IPOs
Source: Refinitive

As in previous years, technology, healthcare and industrial companies still account for a large share of the IPOs. Between January 2021 and September 2022, the tech sector raised $43.0 billion in 82 deals; the health department raised $26.8 billion in 151 deals; and the industrial sector raised $19.7 billion in 21 deals. First IPO applications also fell from 293 in the first nine months in 2021 to 80 in the comparable 2022 period. There were 17 first IPO applications in September 2022, more than 21% of all filings in 2022, which may indicate on a renewed interest in access to public markets.

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This was followed by a panel discussion with perspectives from PwC. Based on market insight and ongoing concerns about the difficulties in accessing public markets, the Committee voted to recommend that the SEC recommend harmonization of the rules for IPOs, SPACs and direct listings.

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