Elon Musk is no longer the richest man in the world. Tech stocks are no longer the market’s favorite stocks (at least not par excellence). The IPOs seem to have vanished. And cryptocurrencies cannot get out of the black hole into which they have plunged.
“Although in theory there is a lot of money in the market, the geopolitical situation is leading people to be much more cautious, there is no debt and the operations are being carried out with equity (investment capital) and with a view to refinancing them, and the prospects are still there being in very high multiples”, says Jose Antonio Sánchez-Dafos, mercantile partner of Latham & Watkins in Spain and Portugal.
“This is the perfect storm for us to be relatively stationary”, he sentenced in an interview with Business Insider Spain the Technology committee member, who led the legal team behind the sale of Glovo to Delivery Hero.
These are the players who have suffered the most from the stock market crash in 2022.
1. Elon Musk
The troubled purchase of Twitter is not all that Elon Musk, the tech mogul who wants to populate Mars, has suffered in the past year. The Tesla CEO has lost regarding $130 billion (more than 122 billion euros) of his net worth in 2022.
This hole is the result of a fall of almost 70% of the shares of his electric vehicle company.
“Tesla is having a very bad time and will continue to have a bad time. It is one of those companies from which very, very strong growth rates are expected and which will be very difficult to confirm”, he commented in an interview with Business Insider Spain Eduardo Bolinches, economic analyst.
The current economic situation and the drop in demand for its vehicles has led the company to extend the slowdown of its factory in China until January, for now.
2. Technological actions
While Nasdaq has fallen just 3% since the Twitter purchase compared to Tesla’s 50% drop in the same period, the benchmark tech index has had one of the worst years in its history. In 2022, technology shares plummeted 35%.
Meta has done so by 66%, Apple and Amazon by 26% and 49% respectively. And Netflix, more than 50%.
“In 2021, they took advantage of the stock market pull, the rise following the pandemic and certain situations that seemed like they were going to change forever. For example, new technologies. Everyone extrapolated that everything was going to continue like this and technology companies went up a lot”, says Miguel Uceda, investment director of Welzia Management.
The main problem these companies are facing right now is their valuations and rising interest rates, analysts agree.
“The sectors that have been penalized the most by interest rate rises have been those where future benefits, but close in time, were low but with great growth. Those were the tech companies.”, confirms Unai Ansejo, co-CEO and founder of Indexa Capital, in an interview with Business Insider Spain.
4. Spac
The perfect storm that Sánchez-Dafos cited earlier also changed the course of special purpose acquisition companies, known as SPACs (for its acronym in English: special purpose acquisition company).
In 2022, SPACs fell 86% over the course of the year, according to SPAC Analytics. And the IPOs (initial public offerings on the stock exchange) of SPAC, more than 70% in 2022.
“There is clearly a cooling off in the SPAC and sponsorship market. Perhaps alternative markets are being sought, but the market feeling is that sponsors are going to take some time (leaving the SPACs they are in or requesting an extension to carry out a better operation), but with the intention of returning”, defends the lawyer.
Of course, the SPAC will never once more be as we know it.
“The SPACs that arise in the future will not have the same structure as the current ones. You will not be able to leave as soon as you close an operation, even if it is an incentive to invest”.
“Now he was raising any SPAC. What is going to happen, probably in the third quarter of 2023, is that only teams with a track record (a history of operations) and teams that, perhaps, will create SPACs with clearer intentions and with some sense, will raise SPACs. It is not a dead market, it is a market that is going to have a correction”, he clarifies.
Welzia Management’s Uceda also believes that this year will see higher issuance volume than we have seen in 2022. But not with the joy of previous years.
“Any company is not going to go public to make cash due to a rise in valuations”, he defends.
5. Sam Bankman-Fried and the collapse of cryptocurrencies
The total capitalization of the cryptocurrency market is below $1 trillion, since it peaked at $3 trillion in late 2021, according to data consulted by Business Insider. Celsius and Three Arrows Capital filed for bankruptcy.
Then came the liquidity crisis and the leaks of the movements of FTX, the cryptocurrency exchange of Sam Bankman-Fried – which is already facing federal fraud charges.
The sudden bankruptcy of FTX cast even more doubt on the cryptocurrency market, which continues to plummet. Experts who had spoken to Business Insider say that traditional companies will be more skeptical of cryptocurrency-related deals.
Diego Ferragud, CEO and founder of Criptendo, also believes that there is still time for crypto values to hit bottom, according to his statements in an interview with Business Insider Spain.
“Cryptocurrencies are going to keep going down. Although, in the case of Bitcoin, not as much as it has done so far, which has gone from 60,000 to 15,000″, dice.
“Within the cycle, we are in the part of fear and disappointment, the lowest part of the market. I calculate that, following stabilization, in 2024 we will begin to see another rise”.