Adena Friedman, NASDAQ CEO, joined The Claman CountdownClaman Countdown to discuss the status of the IPO market and what investors can anticipate after an extremely volatile year in 2022.
Friedman said investor demand struggled in 2022 because of the soup of macro-issues that catastrophically hampered their ability to determine a company's future.
I'm with investors over the last year and they've had to deal with a rising interest rate environment, rising inflationary environment, geopolitical unrest and frankly, the recovery from the Pandemic. Fiscal stimulus is not as strong as you think. They're dealing with a soup of macro issues, which makes it really hard for them to sit down and model the future of a company, Friedman explained on Wednesday.
Friedman argues that it is important to understand before investing due to the stunning difference between the IPO markets from 2021 to 2022.
There are about 200 companies on file to go public on NASDAQ. As we look at the pipeline of supply, it's a really strong pipeline of companies that want to tap the public markets. The NASDAQ chair explained that you need to have demand.
Some companies are pulling their IPO's because of the lack of demand from nervous investors, which leads to more uncertainty and concern, according to Claman.
Friedman urged investors to understand the cost of capital, the potential growth of the business, and the inflationary environment that the company is going to operate in before investing in order to achieve optimal results.
In 2022 all of these factors were unknown, making it very difficult to gauge the prosperity of a company.
I feel that it's likely that more of those unknowns will become known. We'll see where the interest rates go. The NASDAQ president said that the situation is at least more known now, and the pandemic is further behind us.
I think it will give investors better ability to figure out how they underwrite deals. We're hoping that we're hoping we'll see more vibrant IPO environment in the second half of the year for sure, Friedman concluded.