As Stock Market Freezes, IPOs Plummet... Global Fundraising Hits 19-Year Low in First Half of This Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Amid a frozen global stock market in the first half of this year due to high inflation and recession concerns caused by tightening monetary policies of major central banks, the scale of corporate fundraising through stock market listings has hit its lowest level in 19 years since the collapse of the IT bubble.

On the 29th, Japan's Nihon Keizai Shimbun cited financial information company Refinitiv and reported that corporate fundraising in global stock markets from January to the 9th of this month totaled $196.4 billion (approximately 253.6 trillion KRW), a 70% decrease compared to the same period last year. This is the lowest level since 2003 ($132.4 billion), following the collapse of the IT bubble.

Nihon Keizai evaluated, "Global stock markets have plummeted due to financial tightening and the Ukraine crisis, and investors are showing risk-averse tendencies." Major indices in the US New York Stock Exchange and European markets have fallen about 20% since the beginning of this year. As the market freezes, there is a phenomenon of avoiding fundraising through it.

The sharp decline in fundraising through the stock market occurred worldwide but was particularly notable in the United States. US corporate fundraising amounted to about $30 billion in the first half of this year, falling to less than one-sixth of the previous year. Last year, listings through Special Purpose Acquisition Companies (SPACs) led the market, but this part significantly decreased as the stock market froze this year. According to market research firm PitchBook, SPAC fundraising from January to March decreased by 90% compared to the same period last year.

As a result, for the first time since 1990, the US was surpassed by China in terms of fundraising scale. In China, fundraising through the stock market in the first half of this year was about $70 billion, a 60% decrease compared to the same period last year, but the decline was smaller than the approximately 80% decrease in the US and Europe or the roughly 70% decrease in Japan. The amount raised was twice that of the US, marking the first time since 1990 that China has overtaken the US.

Earlier, market research firm Dealogic reported that China's initial public offering (IPO) scale from January to May this year approached $35 billion, more than double the $16 billion IPO scale of Wall Street in the US. Some foreign media interpreted that the Chinese securities regulatory authority sending managers to the Shanghai Stock Exchange to encourage listings led to the increase in IPOs.

Among Chinese companies, China National Offshore Oil Corporation (CNOOC), a state-owned oil company listed on the Shanghai Stock Exchange in April, raised 32.2 billion yuan (approximately 6.2 trillion KRW), securing the largest amount of funds. This company was originally listed on the US stock market but was delisted during the Donald Trump administration.

Not only the stock market but also the venture capital industry supporting startups has frozen. Last month, market research firm CB Insights reported that global venture investment in the first quarter of this year was $142.4 billion, a 20.7% decrease from the previous quarter, and forecasted that the second quarter would see a further 19% decrease to $115.4 billion. Key figures in venture capital advised startups to "focus on immediate survival rather than company growth."