The IPO Winter

Sovereign wealth funds decreased direct investments at the late stage of capital raising and pre-IPO and IPO, reflecting an increasingly bearish market sentiment.

In 2022, there was a noticeable decrease in the number of direct investments made by sovereign wealth funds in late-stage or pre-initial public offering (IPO) rounds.

This trend reflected the turbulent market conditions caused by the conflict in Ukraine, post-pandemic supply chain dislocations and geopolitical tensions that made investors more risk-averse and less likely to back new share listings. The number of global IPOs fell 49% year-on-year in 2022, and their total value declined 71%, according to S&P data. These risks were material for sovereign wealth funds, which often allocate large equity cheques in late-stage funding rounds. They made them more cautious in their investments in IPOs and instead opted for more illiquid, earlier-stage investments in 2022. Consequently, the number of IPOs where sovereign wealth funds acted as anchors plummeted, reaching an all-time low of only ten investments in 2022, the lowest recorded in the IFSWF Database.

Source: IFSWF Database, 2022.

Jeffrey Jaensubhakij, GIC’s Group CIO reflected sovereign wealth funds’ rising scepticism of companies racing to the market and late-stage rounds of capital: “There are only so many good ideas that can be funded at any one time that will make you money,” he said on a panel at the World Economic Forum in Davos, Switzerland, January 2023. “Investors – ourselves, as well as the venture firms and the growth firms – we only have ourselves to blame.” He added that 2021 saw the standard level of investment in the sector many times above trend, a surge that should have given investors pause.