Despite the relief rally in the final week of May, stocks are down and investors are considering reducing their positions in the companies they took public in 2021, even where they’re sitting on heavy losses as stocks trade well below IPO prices.

Accelerated bookbuilds have been anything but accelerated of late, held back by earnings season and last month’s Federal Reserve meeting, at which the central bank made the first of a series of anticipated base rate hikes.

Continued market volatility since then has made equity issuance next to impossible. But bankers are eagerly waiting for conditions to settle so that they can get away block sales of 2021 IPO names, even though many are now in the red.

Sub-mergers and acquisitions

Stocks may be unlikely to return to IPO levels soon, but that isn’t stopping sellers from looking for an exit.

At the front of the queue are financial sponsors, many of which are still in profit having backed these companies much earlier. Selling below float prices makes sense when you’re still in the money and can see ample opportunities to redeploy that capital in private markets, away from the rollercoaster ride of equities markets.

These PE firms are looking to their advisers to understand what the perception is of doing block trades when the stock is down as much as 30% since January and sub-IPO level.

Discount down

Tech is where the most pain is being felt, and it is these assets that have flocked to stock markets since the pandemic. Investors have switched to defensive positions that are less sensitive to, or even benefit from, inflationary pressures, such as energy, infrastructure and healthcare.

Even where investors are willing to take a bet on last year’s flagging IPO candidates, many will demand large discounts for taking on this risk. The average EMEA block discount since Russia’s invasion of Ukraine on 24 February has been 7.35%, according to Dealogic.

Even with this hefty average concession, many of this year’s block sales are also underwater versus their recent issue price as the downward trend has become a confirmed bear market. This means demand for even wider discounts should be expected.

At some point those concessions will be too big to stomach. Prospective sellers may just have to hang on for the white-knuckle ride.

Large losses: Some of the top 2021 listings suffered major declines