IPOs have dried up after last year’s IPO-palooza, and banks are taking a nearly $5B hit

There’s an IPO drought… and it’s leaving Wall Street thirsty. Big banks like Morgan Stanley, Chase, Bank of America, Goldman, and Citi make big bucks from helping companies go public. But as initial public offerings have slowed to a trickle, fees have shriveled:

• Fewer offerings, less champagne: The Big Five investment banks have earned just $645M from IPO fees this year, compared to $5.3B at this point last year (don’t cry for the banks: their profits mostly come from other services, like wealth management).
• Boom to bust: Last year companies raised a record $286B through 1K+ IPOs, or three IPOs per day. Already this year there was a 25-day stretch without a single IPO, the longest dry spell in five years.

A perfect storm… Last year, IPO conditions were ideal: booming markets, low interest rates, confident investors, SPACs, and online roadshows made listing easy. But the clouds have rolled in and most of last year’s IPOs are trading below their listing prices (not encouraging for prospective IPO’ers). Some other reasons for the reversal:

• Too many IPOs: We may be seeing "demand pulled forward" — aka some companies that would’ve IPO’d this year already did last year.
• Too many options: VCs are sitting on record cash piles, giving startups easy access to private $$ — and one less reason to tap the public markets.
• Too much uncertainty: Now public-curious companies have to navigate the effects of war, a newly hawkish Fed, and bearish markets.