Stock volatility has shut down the IPO market

It’s an eye-opening development.
It’s an eye-opening development.
Image: AP Photo/Richard Drew
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Not a single company managed to go public in the US in January, marking the first month since 2011 to record an IPO shutout.

The complete lack of IPOs is a reflection of how bad things have been in the stock market for the past few months and in January in particular. The S&P 500 started off the year with its worst monthly performance since August and second-worst in three years.

As the Wall Street Journal (paywall) notes, August is when the trouble started, thanks to the stock market collapse in China that spread across the globe:

The number of U.S.-listed IPOs in 2015, as well as the total money they raised, declined sharply from 2014. Cracks appeared in the market during the second half of last year as volatility in stocks escalated and decreased investor appetite for risk led to some companies, including retailer Neiman Marcus Group, to delay going public.

The skittishness can be seen in CBOE’s Volatility Index (VIX), colloquially known as the “fear gauge.” The index measures options activity on the S&P 500 stock index, and there have two spikes in the last year that have raised it to levels not seen since the financial crisis.

Beyond the current market turmoil, big names that have managed to go public in recent years, including Twitter, GoPro, and Fitbit, have seen their stocks sink below their debut prices, which could scare off investors from other young companies.

For now, the biggest victims are companies trying to raise money in the stock market, like online lender Elevate Credit. But if the drought continues, it could weigh on investors already worried about another recession.