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IPO Trends in 2022

Written by Monica Savaglia
Posted January 18, 2022

I hope you’re in an IPO mood, because I’m talking about 2022 IPO trends. 

2022 could be a very unique year for IPOs — especially as we’re coming out of 2021’s record-breaking year.

In 2021, the IPO market hit historic highs in terms of the total number of companies that went public. Over 1,000 companies IPO’d in 2021 — that number includes SPACs.

I’ve been focusing on IPOs and the IPO market for a few years now and 2021 had to be one of the busiest years I’ve ever witnessed. 

Companies were going public left and right. It seemed like there was a rush of IPOs every week. Companies saw that the demand was there and had to seize the moment before it was gone. 

There were a few moments when the market took a breather, but it didn’t last long. 

Another thing that didn’t last long was the IPO momentum. A majority of these recently public companies were falling below their IPO prices. An article by The Wall Street Journal published on December 29 reported:

After a sell-off in high-growth stocks during the waning days of the year, two-thirds of the companies that went public in the U.S. this year are now trading below their prices.

There could be a few reason that this gradual decrease of returns occurred...

In December, Federal Reserve Chairman Jerome Powell indicated that the U.S. could experience a rise in inflation. That announcement could have given central banks a reason to raise interest rates. This most likely triggered the sell-off in technology stocks that we experienced in December and going into January.

One of the most attractive qualities about IPOs is that you’re investing early in a company that could deliver big profits in the future. 

But there’s not much you can know for certain when investing in these companies. As with most investments, investors are taking some risk and hoping that it pays off. And when rates are rising, these types of investments become even riskier and more costly.

This would likely cause investors to be a little more reserved when it comes to the companies they're investing in.

Quantity vs. Quality

Like I said earlier, the amount of IPOs in 2021 broke records. But that doesn’t mean that all of those companies possessed attractive future growth potential. A lot of them probably went public to earn some cash while there was an IPO market boom.

There’s that old saying: Quality over quantity. I think that applies perfectly here.

I’d rather see more companies going public that have solid financials, have a good plan for development and expansion, and are doing business within an industry that has strong growth potential.

I don’t care if there were over 1,000 IPOs in 2021. I care about the ones that possess the qualities needed to succeed in the long term. That’s what I want to see from 2022, and I don’t think I’m alone when it comes to that.

I'd suggest that companies looking to go public in 2022 take a little more time to provide realistic valuations and IPO prices. To focus on qualities that make an investor see the reward rather than the risk.

There’s the sense in the market that investors are trying to be more practical when it comes to IPOs, especially with the current market conditions.

So in 2022, I’m predicting that there might not be 1,000-plus IPOs, but instead, we'll see more market debuts from companies that give investors more confidence in them and are worthy of the buy.

2022 could be a record-breaking year, not because of how many IPOs there will be but because of the profits that will be made.

Could Fintech Be a Big IPO Trend in 2022?

I’m also predicting that financial technology will be a major trend for IPOs in 2022.

Forbes reported that in 2021, investment in fintech almost doubled compared with 2020. That the sector hit a record of $91.5 billion in global funding in the second half of 2021. 

Fintech in your everyday life can involve things like mobile payment apps, cryptocurrency, and blockchain. Essentially, things that making your life easier and more efficient. 

Klarna is one company that’s making consumers' lives a little easier. It’s a fintech company that offers a "buy now, pay later platform," and it has been rumored that the company could be considering going public in 2022. 

"Buy now, pay later" platforms offers more options to consumers to make purchases on payment plans. Klarna’s platform offers no-interest payment plans, which helps consumers by allowing them to make purchases that they probably wouldn’t have made otherwise because they were afraid of interest or just didn’t have the lump sum upfront.

Klarna is a Sweden-based company that was founded back in 2005. The company reports about 90 million active customers across its 250,000 merchants on its platform. In June 2021, Klarna was valued at $45.5 billion. It has also recently partnered with another fintech giant, Stripe, to join forces and grow its platform.

The company has become one of the world’s top five most valuable fintech companies. While Klarna does have a hefty valuation, it seems that its valuation could be well deserved. 

The company has yet to file its IPO paperwork with the SEC, and until that happens we won’t fully understand Klarna’s financials, which would paint a more accurate picture of Klarna’s future in the fintech industry.

I’ll be keeping an eye on this one, as it could be big deal for 2022.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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