The Initial Public Offerings (IPOs) of stocks or bonds used to be a steady and reliable source of revenue for businesses and investors alike. Unfortunately, they have become a rare occurrence in recent months, causing many to wonder when IPOs may be returning in full force. While it’s difficult to make specific predictions, looking at how IPOs have reacted to market shifts throughout the past few years may hold clues as to when an uptick in activity could be expected.
In the wake of the 2008 financial crisis, venture capitalists began to exercise more caution when evaluating potential investments. This translated to a steep decline in the number of IPOs completed in the coming years as investors became more skittish and put their money elsewhere. Venture capitalists still managed to raise some capital through IPOs, but by 2016 activity had reached an all-time low.
Fortunately, 2017 brought with it a desire to take risks and invest in the future, leading to a resurgence in the number of IPOs. With more money available and a renewed confidence in the markets, investors were eager to invest in startups with the promise of bigger returns. Unfortunately, the stock market volatility in 2018 caused this uptrend to abruptly halt.
Since then, the number of IPOs has been on the decline, with 2020 being especially devastating. With the coronavirus pandemic causing economic disruption and increased market volatility, few companies were willing to risk launching new IPOs.
So, when can investors expect IPOs to return? Ultimately, this will depend on how the coronavirus pandemic plays out in the near future. If the vaccine rollout proves successful and the pandemic is brought under control, it could provide enough stability for the markets to pick up and spur investors to start looking into new IPOs. Alternatively, if the pandemic continues to have a detrimental effect, it may take longer before things pick up and companies start launching new IPOs.
Regardless, it’s important to remember that IPOs are cyclical and, historically, have proven to be quite resilient. Once the pandemic subsides and the markets stabilize, companies and investors will start to consider the possibilities of launching new IPOs. As such, investors shouldn’t be too worried, as IPOs will return in full force in the near future.
