Farewell FOMO! Brace for Hard Landings Next Year.

What to Expect in 2023
Investors have bid farewell to FOMO and are bracing for even more impact after a year in which profitless tech firms, special purpose acquisition companies and anything crypto-related went into a tailspin.

The winnowing process will continue with debt restructurings and corporate bankruptcies rising from current low levels: Besides ongoing fallout from the failure of crypto exchange FTX, capital intensive and interest-rate sensitive sectors such as autos and real estate look vulnerable. Used car retailer Carvana Inc. has already seen two rounds of layoffs and its distressed bonds imply a high probability of default.

Though Porsche AG’s blockbuster market debut in September showed there’s still investor appetite for high-quality companies with strong balance sheets, the initial public offering market will remain subdued and SPACs will continue to return investor cash rather than pursue value-destroying deals.

Private startups will have to raise money at much lower valuations and cash-strapped listed groups will be acquired by better capitalized rivals or resort to esoteric funding such as convertible debt and equity lines of credit. Those with beaten down shares will have to do a reverse split to avoid delisting.

Financial sponsors will capitalize on lower valuations by taking companies private again, following the example of grillmaker Weber Inc. But private equity faces its own reckoning having piled too much debt onto portfolio companies.