Wall Street has also cooled down due to the hawkish stance of the U.S. Federal Reserve and concerns over a growing economic recession. The size of IPO and M&A has decreased significantly from last year, and the financial and investment markets seem to be shrinking.
The Wall Street Journal (WSJ) reported on the 6th (local time) that the total amount of public offerings by companies listed in the U.S. last month was only 1.6 billion dollars. This is a 95% decrease from the same period last year.
The shrinking IPO and M&A market seems to be due to companies delaying the listing period in consideration of the frozen market situation.
The M&A market also showed a contrast from last year, when it broke a record high due to the deepening recession. The total amount of M&As achieved in the U.S. in September and October was 219 billion dollars, down 43 percent from the same period last year.
Last year, the benchmark interest rate was virtually “zero,” but the Fed’s aggressive rate hike is believed to have increased the burden of raising funds as the cost of financing soared. According to global credit rating agency Fitch Ratings, U.S. companies will have to raise at least $200 billion this year and next year for increased interest costs.
In addition, as the economic slowdown instability spread, market preference for safe assets increased, making it difficult to raise funds for companies with low credit ratings. During this period, the issuance of loan-backed securities (CLOs) issued as collateral by combining loan bonds from companies with low credit ratings fell 97% from last year.
Another reason for the sharp drop in the amount of CLO issuance is that the value of collateral has fallen due to falling asset prices such as real estate owned by companies.
The WSJ diagnosed that such market conditions are putting some companies at a life-or-death crossroads. In fact, Internet retailer Joy Technology succeeded in listing through a merger with a corporate acquisition company (SPAC, SPAC) in October last year, but filed for bankruptcy protection in June after failing to raise funds and secure investors.