Friday, June 28, 2013
I was curious to know whether the recent rise in interest rates, and corresponding stock market correction, was having any effect on the IPO market. IPOs are Initial Public Offerings - private companies first turning into public companies by offering their shares on one of the public markets. Accordingly, I updated the graph above, which shows the cumulative count of IPO pricings since 2008. The rate of these IPOs is a (rough) proxy for the rate of finished innovations reaching the economy, and so is (again very roughly) associated with economic growth.
I first made this graph in June of last year, and the data are from Yahoo Financial. As you can see, 2008 and 2009 had a suppressed rate of IPOs due to the financial crisis and great recession. Since then they've been proceeding at a steady pace. The rate in 2013 is slightly higher than the last three years, and there's no slowdown in the last couple of months.
You can see this by looking at the yearly counts:
We have been running at a little over 200/year, but if the pace of the first six months of 2013 were to continue, we'd end up a little shy of 300 this year. Whether that will happen or not, I can't say. However, I don't expect a major pause in IPOs as a result of the current correction. That's because the correction is based on perceptions that perhaps the Fed will tighten before too long (and higher interest rates would tend to imply lower stock market prices). If the correction gets too deep - to the point where it started to affect the real economy (eg by stopping IPOs), then I would expect the Fed to back-pedal swiftly. They are already saying as much.