After a subdued couple of years that followed a stellar performance in 2021, the market for initial public offerings (IPOs) is expected to recover some ground in 2024.
The market for new listings was, during 2022 and 2023, hit by rising inflation and interest rates, which raised funding costs and made markets more turbulent, in turn making it more difficult to price IPOs.
Under these conditions, many companies looking to spin off businesses and private equity groups seeking to launch their holdings publicly decided to either pull or postpone planned IPOs.
The results were a massive downturn in IPO activity. Global IPOs in 2023 fell to a total 1,298 flotations, down from 1,415 in 2022, and only just over half of the 2,400 seen in 2021. In the U.S., 154 IPOs raised $25.8 billion in 2023.
Its not difficult to understand why so many were pulled. Out of the 154 U.S. IPOs in 2023, nearly two thirds currently have share prices below the debut price. Half of those launched during the stock market rally of the fourth quarter have failed to regain their launch price.
Among the larger and better known companies, there were some major successes. ARM Holdings ARM , the U.K.-based chip designer, raised $4.9 billion and its shares are 150% above launch price, while Birkenstock Holding BIRK , the shoemaker and retailer, raised $1.5 billion and is still 7% above its IPO price.
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The hope that falling inflation will see interest rates come down during the second half of 2024 has already seen a small improvement in the first two months, compared with January and February 2023.
But market volatility could pick up during the fourth quarter as the presidential election becomes the major focus. So, those looking to launch are likely to be aiming for the window of opportunity before election-fever begins to sway the equity market.
While the increase in IPO activity will be gradual, we recommend that anyone considering a 2024 IPO should engage in timing discussions now, said analysts at Jeffries.
There have been 28 IPOs so far in 2024, with 13 still in the money, while three are unchanged. And weve already seen larger launches in terms of cash raised, than seen in 2023.
Kazakh fintech group Kaspi KSPI raised $18 billion on Jan 19 and remains nearly 4% higher than launch price. Amer Sports AS , the Helsinki-based sporting equipment company, raised $6.4 billion and is still 23% above IPO price, while Mexico-based BBB Foods TBBB raised $2.3 billion and is up 15.5%.What IPOs To Look Forward To?
As conditions in the market gradually improve, we can anticipate larger IPOs later this year. Among the expected launches are:
Plaid, a privately held fintech company that makes data networks for payments systems could be among those to launch in 2024. Although, investors should note that the company discussed IPO plans in each of the past three years.
The companys growth has been driven by the fast-growing payments sector and increased adoption of digital transformation among financial services companies. Its estimated IPO valuation has been reported as high as $14 billion.
Chime, is a digital banking group that offers financial services through a mobile platform. It could be among the most eagerly awaited IPOs over the past couple of years due to its rapid growth, that has seen its valuation estimated as high as $25 billion during peak IPO interest in 2021.
Pricing data from Forge, an online platform where private shareholders can trade shares with accredited investors, suggest the companys valuation could have fallen as low as $6 billion.
Finally, lets look at Skims, if only for its star quality. Kim Kardashians fashion brand has quickly gained a strong foothold in the industry and is currently valued at around $4 billion.
Private investors who are unlikely to get their hands on shares at the initial public offering can opt for any number of IPO-focused exchange traded funds that adjust their holdings to include the latest offerings.
Among these is the Renaissance IPO ETF IPO whose shares are up 2.3% so far in 2024. In 2023, it gained 46%.
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